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View: Forget disinvestment, government should privatise Air India
Even as several analysts have recommended the privatisation of Air India, it has been reported that the Union government is considering disinvestment as a means of improving the finances of the so-called ‘national carrier’. ET’s columnist Swaminathan Aiyar, writing in the Times of India ( ‘The Maharaja’s Worse Than Mallya’ ) has very aptly suggested that the private budget airline IndiGo should, in fact, lay claim to be India’s ‘national carrier’, given the number of destinations across the subcontinent it now connects on a commercial basis with no government subsidy.
Asked if the government was viewing disinvestment as an option, Union minister for civil aviation Ashok Gajapathi Raju reportedly said, “What else would it be? We need to make Air India a sustainable airline and we are holding discussions. All suggestions are welcome.”
Here’s a suggestion. Forget disinvestment. Just privatise. For many in the government, disinvestment would be an attractive option. It would mean that the airline will remain a public sector entity with all manner of officials and ministers continuing to lord over the behemoth. However, sincere Raju may be about wanting to make Air India a ‘sustainable airline’, nothing short of a major restructuring — financial and organisational — and rebranding can save the airline.
Financials
Consider first the airline’s financials. Air India has drawn loans of close to Rs 50,000 crore and the annual interest burden itself is around 10 per cent of that sum and amounts to 25 per cent of the airline’s revenues from scheduled traffic services. No wonder the airline is already lagging behind on interest payments and runs the real risk of defaulting on these payments.While Air India has claimed a modest operating profit in 2016-17, insiders believe this is no more than a mirage and unlikely to materialise. What has sustained the airline is the whopping Rs 42,000-crore lifeline it was thrown in 2012 by the UPA-2 government after Praful Patel was moved out of the civil aviation ministry.
Many have argued that Air India’s chronic problems were made worse during Patel’s tenure due to a variety of managerial decisions taken, including the merger of Air India and Indian Airlines. Whatever the history, the fact is that the airline’s present is miserable and future bleak.
The airline is being sustained by the largesse of petroleum companies, the Airport Authority of India (AAI) and the shareholders of the Delhi and Mumbai airports. When those holding IOUs come knocking, Air India will have no cash to pay up. A four-year Turnaround Plan implemented since 2012 has not been able to address the financial problems facing Air India. Analysts believe that the airline is unlikely to be able to meet its commitments under the plan.
Taken together, the airline’s poor track record in financial management and commercial operations, despite sincere efforts on the part of its management, has meant that the government has been trying desperately to breathe life into a dead body.
The government’s plan to inject more funds, raised through disinvestment, will come to nought. In fact, even the disinvestment effort may well not take off. Who would want to hold the shares of an unreconstructed entity?
Unviable Airline
The time has come to face the hard fact that successive governments have helped kill the national carrier. However, there is no point in either crying over spilt milk or playing the blame game trying to figure out who killed Air India. It’s time the government opted out of civil aviation and sold Air India to the highest bidder.When the Atal Bihari Vajpayee government considered this option at the turn of the century, there was understandable concern both about a private monopoly replacing a public monopoly and about ensuring airline connectivity to remote parts of the subcontinent. Today, neither is a matter for concern.
The healthy growth of private airlines, and the fact that at least some of them like Indigo provide connectivity to distant airports, has meant that a privatised Air India will operate in a competitive environment. To ensure that commercially unviable airports remain operational, the government can provide subsidy to any airline willing to service such airports, especially those of strategic importance.
The initiative to privatise Air India will have to come from the very top of the government. Within the civil aviation ministry, within government as a whole and within Parliament, there are far too many vested interests who will oppose the move.
For far too long have far too many functionaries of the State benefitted from the privileges extended by a government airline. They will oppose privatisation in the name of ‘national interest’ or workers’ privileges while seeking to defend their own.
Seventy years after Independence and 20 years after the opening up of civil aviation to private airlines, the time is ripe for the government to get out of the business of flying the top 5 per cent of Indians around India and the world in the name of national interest. Andy Dalton Womens Jersey
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