AI crisis: Ball is in govt's court

By: Sreekumar Narayan
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As pilots again hold Air India as well as the country to ransom, questions are being raised over the state-owned carrier's future. In view of AI's humungous losses, some have urged the government to make drastic changes. Those advocating privatisation cite the examples of USA and the United Kingdom. Both countries do not have flag carriers.

Even if their contention is true, let us not forget that people worldwide tend to associate Air India with our nation. Since it is a matter of national pride, the government has to examine all the options thoroughly before writing it off. Besides, other famous carriers are not making profits. In fact, it is well nigh impossible for an airline to break even at present because the fuel costs are unmanageable.

International Airlines Group, the parent company of British Airways and Iberia of Spain, reported a pre-tax loss of 263 million euros for the first three months of 2012 compared to a 47 million euros loss during the same period in 2011. Lufthansa's operating loss was to the tune of 381 million euros in the same period. Yet, we have not seen a clamour in Germany for it to be shut down.

The problem is that AI's figures are nowhere close. Before Air India was merged with the erstwhile Indian Airlines in 2007, the combined losses of both amounted to only Rs 770 crore. However, the soaring price of aviation turbine fuel and a decision to buy 111 new planes meant that AI Air India accumulated a debt of Rs 42,570 crore by March 2011.

Civil Aviation Minister Ajit Singh's quip in the midst of the ongoing pilots' strike that "Air India is sick and I hope it doesn’t reach ICU" is a candid admission of the crisis plaguing AI. Since its quantum of loss is clearly unsustainable over the long term, it is high time the government took some hard decisions setting aside extraneous considerations.

Experts have pointed out that wherever national carriers have been privatised, they have done well subsequently. Their argument is a compelling one. Back in 2003, the NDA regime did think about re-privatisation but the plan was put on the backburner following the global economic slowdown. It could be revisited and if necessary, alterations can be made.

There is no denying that restructuring is imperative. Non-profitable routes should be cancelled and there should be downsizing to an extent. AI can perhaps enter into arrangements with international airlines for routes where the load factor is poor.

The annual wage bill has also to be taken care of. AI doles out Rs 3100 crore every year to its 31000-odd employees. This number is too great. While large-scale retrenchment might not be politically feasible, removing some of its flab will definitely make AI more efficient.

In April, the carrier received Rs 30,000 crore rescue package. It is not clear as of now whether it would be sufficient. And the moot point remains, should the government repeatedly bailout AI?

Though the government has the primary responsibility of saving the airline, it obviously cannot afford to keep on pouring taxpayers' money into a bottomless pit, given India's large fiscal deficit of 5.9 per cent of GDP.

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