The Maharaja\’s worse than Mallya. Declare Indigo the national carrier

To call Air India the national carrier, and so justify running it at losses that would make Vijay Mallya\’s Kingfisher blush, is a tragi-comedy that must end. Indigo is the top domestic carrier hare of around 40%, followed by with a market share of around 40%, followed by Jet at 18%. Air India comes third at 14%, about to be overtaken by Spicejet at 13-14%.

If Air India staff strike to protest attempted privatization, the public will not suffer at all-other airlines will easily pick up the slack. That shows how irrelevant Air India has become for travelers, even as it becomes an ever-thirstier bloodsucker of public funds and bank borrowings diverted from public health, housing and poverty reduction. Earlier this month, the Cabinet Committee on Economic Affairs decided to privatise three hotels. A press release said “running and managing hotels on professional lines is not the work of the government or its entities“. Surely the same is true of running airlines.

Air India has never been run professionally and never will. It is a horrendously costly political plaything. “Air India is nothing but a cronies-filling-jobs programme-it is so bloated that successive govts simply do not know what to do except throw good money after bad,“ says Saj Ahmed, chief analyst at Strategic Aero Research. It is hugely overmanned, yet keeps rehiring retirees.

Columnist AK Bhattacharya wrote in 2015, “Former Prime Minister Manmohan Singh undertook 73 foreign visits between 2004 and 2014, entailing a travel time of 246 days. But the problem is that for as many as five of his last visits (17 days), the bills for chartering the Air India aircraft are still under process and the chartering costs for the remaining 68 foreign visits came to around Rs 700 crore. For Prime Minister Narendra Modi, who has so far used the Air India chartered flights for 55 days during his 13 foreign visits, no bills for as many as eight visits have been received by the government, bills for four visits are under process and the bill for only one visit has been computed. Which other airline will agree to offer such easy terms for settling bills for chartering its aircraft?“ Air India\’s losses over decades have entailed countless write-offs and injections of fresh government equity. The UPA government decided in 2012 to pump into a whopping Rs 30,000 crore to revive a sick giant that never recovers despite swallowing gargantuan doses of cash. At a time when airlines across the world are minting money because of low fuel prices, Air India lost Rs 3,587 crore in 2015-16 even while Indigo made Rs 1.987 crore. Vijay Mallya has been castigated for King fisher Airlines\’ unpaid debts of Rs 9,000 crore.But Air India\’s debts and losses over the years have been far higher. If it is a scam for banks to lend so much to a bust private company, how is it less scammy to fund Air India on an even larger scale? The losses are all being made good by taxpayer money diverted from other worthy purposes. Despite past write-offs, Air India has a debt of Rs 46,000 crore, which is larger than the entire government outlay for MNREGA, or child vaccination, or subsidised rural housing. To put it starkly, India is killing babies, worsening illiteracy and poverty .

In its present form, Air India is too sick to privatise. The government and banks will have to write off a large chunk of its debt, something called a “haircut“ in financial circles. Such haircuts are the standard procedure for reviving enterprises that have a future provided past debt is written off. Air India has a large fleet, is a member of Star Alliance, and has slots at international airports, all of which have substantial value. It can be revived provided it gets a completely new private sector management delinked from political pressures of all sorts. That sort of professionalisation has proved impossible to achieve under successive governments after decades of attempts. The only way out is privatisation.

The government must recast Air India financially to make it auctionable at a decent price.The government can retain a 26% minority share for strategic reasons as well as to profit from rising shareholder value after successful privatization. The political and economic conditions will never be better. After winning the UP and Delhi municipal elections handsomely , Narendra Modi has the political capital to bite the bullet.

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