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Keep the fleet grounded

No one will pay a good price for Air India. The solution is to privatise it, and If need be allot shares to public sector banks, Chanakya writes.

columns Updated: Sep 08, 2012 22:14 IST
Hindustan Times

This is one Maharaja whose privy purse seems to have lasted way too long. Once considered the nation’s pride, the fate of Air India, with its iconic Maharaja mascot, is up in the air. This when it should have been flying high.

As I grappled to fit my baggage into the overhead cabin on an early morning Delhi-Mumbai flight recently, an old question loomed larger than ever before: should the airline be given more cash as oxygen or hived off to private hands in a final sunset plan?

Strikes are an annual ritual after Indian Airlines (IA) and Air India (AI) were combined into a single organisation five-and-a-half years ago. Bureaucrats and pilots are often locked in skirmishes. AI and IA saw a combined profit of more than Rs. 75 crore in 2005-06 but losses have mounted since.

With 40,000 employees and accumulated losses totalling Rs. 28,000 crore, the Maharaja needs a lot more than a facelift. From aircraft leasing costs to staff-to-aircraft ratio, the airline is bleeding on all fronts. The daily cash inflow for the airline is around Rs. 40 crore while the outgo is Rs. 57 crore. Nimble private airlines have eroded the former monopoly’s market share, which now stands at about 17%, down from a whopping 50% in 2003. This grim reality, that Air India needs immediate surgery, is not lost on either side of the aisle.

An aviation expert and a friend summed it up well when he pointed out that while other airlines need the ‘load factor’ to survive, Air India needs the ‘dole factor.’ Facts suggest that the description is appropriate. In April, the government announced a Rs. 30,000-crore cash-booster that will be infused as equity over an eight-year period. The condition: it has to turn profitable by 2018.

I cannot dispute the fact that it is in everybody’s interest that a clear revival plan emerges. But, at the same time, I also can’t help wondering if it would not be more appropriate to rescue Air India from a taxpayer bailout, rather than perpetually digging deep into the exchequer’s pockets for staying afloat.

I cannot but agree with a consultant’s report when it observed, rather tersely, that the airline was slipping into a “slow and silent decline” and that unless drastic steps were taken the airline would slide to a “point of no return.”

Central to any revival strategy is shedding flab in a carrier that has half as many more employees per aircraft than 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; its employee:aircraft ratio stands at 243:1 compared to 120:1 of its less illustrious private peers.

Even after the five-and-half years of the IA and AI’s marriage — which can at best be termed as rocky — the manpower integration looks far from complete. And even at the cost of sounding hyper-cynical, I am now increasingly convinced that the bosses have done little more than exploit the differences or rivalries between the staff of IA and AI. The 58-day long agitation by AI pilots over the rights to fly the Boeing Dreamliner aircraft, which ended only a few weeks ago, brought to the fore the ugly manifestation of the nightmarish human resource management in a firm built on the foundations of a glorious past.

The taxpayers, you and me, are well within our rights to know why our money is going into a bottomless pit every year on some employees, who I learn, are among the most pampered. I am sure it will make your blood boil when you hear that while AI bleeds, its management has stitched up cushy deals to mollycoddle its pilots — the best paid in the industry — that guarantee them fewer flying hours, bigger rest periods and huge perks.

Air India’s owner, the government, its management, and more importantly, its employees need to come up with a workable plan, which cannot involve spoiling it employees and still do nothing about strikes that hold thousands of travellers to ransom. You can't sell the airline today when it is at its nadir. No one will pay a good price. The solution is to privatise AI, get a private management to run it and, if need be, allot shares to public sector banks — its primary lenders.

In 2002, it seemed a solution had been found to the AI problem with a majority stake buyer, but the would-be suitor backed out. Ten years later and in the 100th year of India’s civil aviation history, when the first air flight between Karachi and Delhi was started by the Indian State Air Services in 1912, it is perhaps time for the government to exit from managing the national carrier. The Maharaja needs to return to its regal past. Any takers out there?

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