Indian Strike - Privatization Is The Answer

The civil aviation industry remains in a turmoil with the latest short term strike of the public sector carrier Indian creating chaos for consumers. Though the strike was thankfully resolved within a day or two, it created headaches and heartburns for the flying public who still regard Indian as the most "reliable" airline in the country. This reputation has been badly battered as people of all walks of life who had to reach destinations on urgent work had to suffer undue hardship. 

The strike came just as the public sector company was in the process of merging with Air India with the aim of becoming one of the biggest players in the civil aviation sector. At this critical stage, its public image as the slow but steady carrier has been badly bruised. Normally Indian is the airline of choice for those who put a premium on safety and reliability as well as punctuality. It is well known that Indian has considerable infrastructure to maintain and operate its aircraft efficiently. It also has the reputation of being a safe airline. Besides, whenever there is a traffic jam in the skies or in airports, the civil aviation authorities give priority to Indian flights, enabling them to be more punctual than the other private airlines in such situation.

In contrast, these two days of the strike by the domestic carrier have given the impression that the stodgy but solid player can no longer claim that it is the most dependable airline.

This comes as a blow to the newly created entity that is already aware of the tough competition in the field. The spate of mergers and acquisitions that began with Jet Airways taking over Sahara and followed with Kingfisher's tie-up with Air Deccan is still not over. Kingfisher is making it clear that it is eyeing other acquisitions like the smaller Spicejet or GoAir, depending of course on their availability. Ultimately, it is clear that there will be about three or four large entities in the civil aviation industry within the next few years.

In this scenario, the Indian and Air India combine will have to show a lot more pizzaz than they have recently to beat the competition. Jet is slowly taking over the space of the most reliable and ontime carrier while Kingfisher has got the tag of providing the most comfort and luxe experience. It has yet to be seen whether Indian-Air India will try to launch a low cost carrier like the other two biggies. Jet is swiftly changing Sahara to Jetlite and Kingfisher has made Air Deccan its low cost brand. In any case, the merged public sector entity seems to be lagging far behind the others.

The fact is that it is time to think - yet again - about privatizing Indian and Air India. Globally, the era of the public sector airline seems to be over. Once upon a time, every country had its own national airline which was often government owned, like British Airway, Air France and Lufthansa. But declining profits took their toll as more efficient private airlines forged ahead and most countries have now privatized their national carriers. India will also have to think in terms of privatizing though this proposal has always met with stiff resistance from politicians. The real reason for maintaining a government owned national carrier is the patronage and power that goes along with operating such an entity. It is well known that becoming the minister for civil aviation is a plum post and these cabinet ministers have virtually ruled the skies.

One has only to compare the Air India launched by J.R.D. Tata to the Air India currently operated by the government to see the difference between private and public sector management. When JRD ran the show, Air India was a boutique airline that was renowned globally for its service and class aboard flights. In contrast, Air India is now considered a lame duck. Even Indians shun this international airline which has become a byword for inefficiency in the aviation world. Umpteen stories have appeared in the media about the mishaps that take place owing to overbooking, prolonged delays and discomfort to passengers in this airline. The simple fact is that bureaucrats are not equipped to run airlines and the job needs to be handed over to professionals in the aviation industry.

Any whiff of privatisation, however, elicits strong protests from politicians of all hues. There is a feeling that selling Indian and Air India would be like selling the crown jewels of the economy. In fact, the government could keep a minority stake in the airline while making a strategic sale to a private operator. This would enable it to reap the benefits of revenues from dividends in case the airline improves profitability and yet retain a nominal stake in the company. Maruti Udyog, the Indo-Japanese carmaker for instance, is a case in point where the government has gradually eased out of the company which has in turn become more dynamic as it has been freed from bureaucratic controls.

The latest flash strike in the domestic carrier has thus come as a warning signal to the government. If it really wants the public sector carriers to become effective players in the aviation sector, it will have to take a comprehensive review of civil aviation policies and ultimately take some hard decisions.  

(Sushma Ramachandran is an economic and corporate analyst. She can be reached at sushma.ramachandran@gmail.com


More by :  Sushma Ramachandran

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