Is it Time to Sell Air India, Pauper Maharaja?

With accumulated losses amounting to nearly $3 billion, the 10-day crippling strike of Air India pilots may have come at the worst possible time for the flag carrier, but it has also raised the pitch for privatisation like never before.  'The Maharaja had become a pauper a long time ago,' said Capt Gustav Baldauf, who was brought specifically in to oversee the merger of Indian Airlines with Air India and take the carrier back to its days of glory but quit a few months ago as its chief operating officer. 

'This mess is thanks to the management and constant interference by the government,' said Baldauf, who has served carriers such as Austrian Airlines and Jet Airways in various capacities. Experts said losses are not the carrier's only problems: There is a problem with integration, human resource issues that have now been compounded because of the merger, charges of irrational route planning, and general mismanagement. 

'Who will repay the bank loans worth $10 billion or the dues to oil companies for fuel, or for that matter for leased aircraft and the new ones that have been ordered,' asked Amber Dubey, director for areospace and defence, with global consultancy KPMG. 'On the other hand, Air India is also sitting on billions of dollars worth of assets and property. What will happen to it? How much of it will be on the block and who will have the muscle to buy it?' Dubey queried again. 

Some experts feel the role that had been envisaged for Air India - when it had to serve non-profitable routes for social reasons, evacuate Indians in distress from both within and outside the country - is no longer required.  From being the dominant player in Indian skies about a decade back, Air India's market share fell to 16 percent which was one of the reasons why the government was reluctant to invoke the provisions of the Essential Services Maintenance Act to tackle the pilots' strike. This despite the fact that the carrier has a fleet of 135 aircraft, of which 108 are its own, most of them new and acquired in recent years from the Boeing Company and Airbus Industrie. The carrier runs 460 daily domestic and overseas flights. 

'The only way to salvage the carrier is to either bring in the private sector or include a new stakeholder in the airline in some form or the other,' said Baldauf, under whose tenure the mandate was given to Deloitte to come out with a turn-around plan. 

Civil Aviation Minister Vayalar Ravi, who took charge of the portfolio just in January, said the revival of the flag carrier was his top priority and that every effort will be made to set the house in order.  'We had already invested Rs.2,000 crore (around $450 million) into the carrier last year and it will receive another Rs.1,200 crore ($250 million) this year. So investment will come and the turn-around plan will be implemented successfully,' Ravi told IANS. 

Air India chairman and managing director Arvind Jadhav said the revival plan will focus on equity infusion, shift to long-term loans, interest cut, making repair and ground-handling operations into separate entities, and resolving integration issues.  But Air Marshal (retired) Denzil Keelor, the hero of the India-Pakistan war in 1965 and an arbitrator between the flag carrier and the unions in the late 1990s, feels it was time the government sold Air India. 'It's our money. The tax payers' money. It can be used in so many different ways. Let us build schools, roads. We need all the resources to build this country and get people out of poverty. Let us not waste it on Air India,' Keelor told IANS. 'Otherwise, no one cares about the national carrier - not the politicians, not the management, and not even the unions. They are all just there to use it for their own interests and nothing more,' Keelor added. 

Yet some feel, even though the recent pilots' strike of 10 days dented the carrier's image a lot, there was still scope to nurse Air India back to financial and operational health.  'They can certainly do it. Don't forget it was the number one carrier a few years ago. There is no reason why it cannot be done. This is also a service industry. If the human resource issues are settled, the rest will follow,' said expert Ankur Bhatia of Bird Group.    


More by :  Rohit Vaid

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