Rescue, revive and privatise
Making Air India saleable is the only way the aviation sector can take off smoothly again, HT writes.india Updated: Apr 23, 2012 22:47 IST
There is light at the end of a long tunnel for Air India (AI). Its owner, the government, has promised to pump in Rs. 30,000 crore of equity over eight years on condition that the airline begin a long and painful journey to profitability. The Cabinet has also agreed to stand guarantee to a rollover of the State-owned carrier's debts, principally to pay oil companies, airports and its staff. The bemused taxpayer is, of course, entirely justified in asking whether a company with Rs. 2,145 crore equity that has dug itself into a Rs. 63,000 crore hole in debts and losses deserves a lifeline? And should the management that brought Air India to such a pass now have the job of turning it around. This week's Cabinet decisions are designed to park two-thirds of the bloated airline's 30,000 workers in ground handling and maintenance subsidiaries, fly only one empty seat in every four in its fleet and reach destinations on time nine times out of ten.
The bigger fleet, the Cabinet has cleared the purchase of 27 Boeing Dreamliners, and extra cash are needed so that AI can earn Rs. 5,000 crore more and run on Rs. 4,000 crore less every year. To do this, the airline must cart 17 million people in 2015. If it manages to accomplish this, it could fly out of the red as early as five years from now. But this is not the first revival plan the airline has come up with and the metrics for future cash infusions should be iron-clad, and widely publicised. It can survive if it is run like an airline, not a ministerial fief. The question its owner must ask is how best this can be accomplished, not how to micro-manage near-death experiences. If AI serves the national purpose by expanding its operations in a rapidly growing industry, it has to be as a viable entity. Unless the government acquires extraordinary powers of delegation overnight, the airline is better left to professional managers who are answerable to shareholders. Privatising AI has been knocked off the government's agenda every time serious thought has gone into it. Even listing it with majority government ownership will bring some commercial accountability to its management.
The latest lifeline for AI skirts the larger issue of Indian aviation flying into rough weather perennially. Private airlines have a point when they complain that taxes on fuel and airport fees bump up the cost of flying in India by 60%. Alongside a policy that does- not allow foreign airlines to buy into Indian carriers, this exerts an enormous cash squeeze. Of late, the government is bestirring itself, taking up aviation reforms piecemeal. Airlines flying abroad can now import cheaper fuel, but the logistics are daunting. Bilateral route agreements with other countries are open to private Indian carriers. And there are indications of a rethink on the ban on foreign airlines buying into local ones. The largest stakeholder in all aspects of the aviation business, the Indian State, needs to ensure it remains a going proposition. Rescuing the Maharaja alone is not good enough.