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Flying into the face of danger

Air India needs a fresh vision and a strategic investor. The private sector can provide both.

india Updated: Apr 27, 2011 21:05 IST

The fact that Air India has had to go in for a second restructuring barely a couple of years after it merged with Indian Airlines raises a few uncomfortable questions. The logic of that merger has not been completely upended by the external environment. The economies of scale that were to accrue, a consolidated domestic and international reach and an upgraded fleet are part of any airline’s medium-term goals. What went wrong is a mishandling of the merger process. Two flabby organisations have not coalesced into a leaner structure, capacities have expanded despite a slump in the industry, fleets by competing aircraft manufactures do not permit operational synergies while parity between employees of the legacy airlines is elusive, and the airline continues to be headed by bureaucrats with little experience of aviation.

Central to any revival strategy for Air India is shedding flab in an airline that has half again as many employees per aircraft as the global average. The world over, an aircraft makes money in the air and loses it when on the tarmac; Air India’s bloated wage bill, in contradistinction, makes it cheaper to keep the fleet grounded. The government has deep enough pockets to keep Air India flying against economic logic. As policy maker, on the other hand, the government must bear in mind that the bleeding Maharaja does not bring the industry at large to its knees. And as regulator of aviation, the government has to ensure flights are not cancelled every time Air India’s pilots threaten to go on strike. That is one hat too many the aviation ministry is wearing. Governments in other countries have got around this problem by exiting the airline business and by splitting the ministry’s regulatory and policy jobs.

The government is well within its rights to demand a turnaround strategy from Air India’s management. It would also be a prudential financier if it were to benchmark cash infusion to quantifiable metrics. More than as regulator of aviation, the government must act decisively as owner of Air India to ensure that efforts to arrest the decline are not waylaid into the minefield of industrial dispute. The vision that Air India lacks can easily be imported from the private sector.

The failed marriage with Indian Airlines also needs to be looked at. Induction of a strategic partner for Air India cannot be put off indefinitely if it has to survive in a cut-throat market. No airline can afford to fly without knowing where it is headed.