Logistics

Does Air India still need to keep flying?

Ashwini Phadnis New Delhi | Updated on April 19, 2019 Published on April 19, 2019

Air India is yet to fully recover from a ₹5,765-crore loss in FY17

Funds pumped in state carrier could have saved Kingfisher, Jet Airways: experts

Even after private airlines were allowed to re-enter the Indian aviation space in the early 1990s, State-owned carrier Air India has remained a constant in the sector, despite having its own share of ups and downs.

The airline is still reeling under a financial loss of ₹5,765 crore recorded in fiscal 2017.

Saving private airlines

With Jet Airways temporarily stopping its operations on April 10, the question being raised now is whether Air India is really required — given the price paid by the government to keep it afloat — while smaller players are forced to shut down with much smaller losses?

According to some analysts and experts, there is no need for the government to keep pumping in money into the Maharaja.

Their logic is simple – if half the funds pumped into Air India over the years were given to Kingfisher (which shut down in 2012 with losses of over ₹8,000 crore) or Jet Airways (whose loss is over ₹3,000 crore), the country would have had two airlines with comparatively better service quality and fleet.

“There is no need for Air India. It is serving the needs of a few,” said a former bureaucrat in the Civil Aviation Ministry.

Political influence

Gustav Baldauf, who has worked in both Air India and Jet Airways, probably summed it up best.

Although his tenure in Jet Airways was challenging, there was much to learn. He was proud to be a part of its vision.

“It was so different to Air India where political influence kills every innovation and personal engagement,” he said.

Baldauf worked with Air India as COO in 2010-11. Before that, he was with Jet Airways during 2005-07 as Vice-President, Flight Operations.

Divestment necessary

There are many other reasons for privatising Air India. This approach is also endorsed by the Vision 2040 for the Civil Aviation Industry report, jointly authored by FICCI and KPMG in January this year.

It pointed out that the purchase of Air India by a strong investor group is critical for India to achieve global hub status.

The document adds that despite the government’s significant efforts, the much-delayed privatisation of Air India will lead to mounting losses for the airline in FY19.

“This may require further fund infusion from the exchequer. With no fleet expansion, Air India may see further fall in its domestic and international market share,” the report said.

However, the problem here is that the government’s attempts at divesting the Maharaja have been in vain twice.

No takers

Air India’s current avatar came into being in 2007, when the government merged the airline, which largely focussed on international operations, with Indian Airlines to form a single entity.

Since the merger, the government has had to pump in close to ₹30,000 crore to keep the airline afloat.

Over the years, the government has made two attempts at selling the airline. The first was during the last tenure of former Prime Minister Atal Bihari Vajpayee.

A former bureaucrat involved in the Ministry of Civil Aviation at the time recalls that an attempt to attract some large Indian corporate houses came to a naught, after one of the biggest business families in Mumbai declined to buy out the airline.

“We do not want to move away from our core competency,” the industrial house’s patriarch told the bureaucrat.

The second attempt was made earlier this year. However, the government did not get a single bidder interested in the airline.

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Published on April 19, 2019
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