<p>The Tata Airlines was started in 1932 but post-independence, the government bought it over in 1954 and renamed it Air India (AI). By 1962, it became world’s first all-jet airline and was considered a jewel in the crown by independent India.<br /><br /></p>.<p>The AI had a paid up capital of Rs 154 crore which continued till 2004. Further, till then, the national carrier had never received any budgetary support from the government and it was able to purchase its aircraft and built its numerous properties out of its own funds. <br /><br />After the NDA government took over in 1998, it was decided to privatise state-run airline through strategic sale to an Indian entity which could also have a foreign airline as a joint venture partner. <br /><br />The process of divestment of AI was nearly completed in 2001 but fell through at the last minute as the joint venture partner pulled out and 9/11 incident in New York took place. The UPA government took over in 2004 and reversed the previous policy decision and decided not to divest the airline which was like a holy cow to them. <br /><br />No reasons were cited but this was followed by a decision to purchase new aircraft which had been suspended by the NDA government due to divestment. Since Indian Airlines, the other public sector airline, was also in need for a new fleet, a collective decision to order 111 new aircraft was taken on a ‘nudge’ by then civil aviation minister Praful Patel. This top down decision leaves a lot of unanswered question and former official Jitendra Bhargava in his book ‘Descent of Air India’ (not available in bookshops due to a case filed by Patel) has made a reference to it. <br /><br />Then came the final blow. A decision reportedly taken at the minister’s level but recommended by a compliant consulting company for a fee, it was decided to merge the two airlines. The merger was approved in 2007 but was implemented half-heartedly.<br /><br /> The new AI never recovered from this merger and it was losses all the way till the biggest bailout of Indian history of Rs 32,000 crore. In spite of this, AI has really not made any significant turnaround. <br /><br />This was further hampered by very large allotment of bilateral flying rights to a carrier in a Gulf country to sweeten a deal of an Indian private carrier. In contrast, the publicly-owned Japan Airlines was in a debt of about $5 billion, declared bankrupt but was bailed out and revived successfully by Kazuo Inamouri, the proven entrepreneur and founder of Kyocera and who was specially brought in for this purpose. It was revived within 12-15 months and is now in profits. The lack of will and desire to see through the merger and revival was clearly missing in the case of Air India.<br /><br />While AI is going through an ‘ICU’ liketreatment at public’s expense, it is also celebrating currently the 7th anniversary of its merger with IA which is a fitting tribute to the way tax payers money is being squandered! Further, not only its property assets are being sold, it is getting rid of its fleet by sale. Meanwhile, two new developments have taken place which will impact its recovery. <br /><br />The first is the sale of 24 per cent of equity of Jet Airways to Etihad and its de facto transfer of management to them, which makes Jet a feeder airline to Etihad with its hub at Abu Dhabi and the coming of Vistara, the Tata-Singapore Airline joint venture. The only redeeming fact in favour of AI is that is has finally joined Star Alliance, which will open up a new market provided it improves its performance and quality of service.<br /><br />Road map for aviation<br /><br />There is a need to lay a new road map for future development of international aviation in India. While expansion of aviation depends upon economic growth, a good international and domestic connectivity is a catalyst for growth. It’s a chicken and egg issue. However, past experience shows that city-states of Singapore and Dubai have managed high growth led by civil aviation as they developed their international air connectivity first which made it attractive for foreigners to come and invest in their country. <br /><br />India needs to think on these lines. A well-connected airport becomes a hub and helps growth of business and industry. With Jet-Etihad combination covering west and Tata-Singapore covering the east, it is only AI which can stop India from becoming a passenger-supplying country to Abu Dhabi and Singapore. Can AI achieve it at this late stage? <br /><br />The public sector carrier can still make it provided a complete organisational overhaul is carried out. It has to get out of public sector mould with seniority, nepotism, rigid rules and multi-unions with their extortionist agreements and strikes that kill initiative. It has to transform itself through financial engineering like its shareholding being handed over to public sector banks.<br /><br />Once AI reaches profitability it can also seek a joint venture with an airline beyond Gulf on the west or beyond Singapore on the east. AI now needs a strong counter to the new development of Jet-Etihad and Tata-Singapore carrier to ensure a growth of a hub within in India. Looking into the current situation, an early revival of this white elephant seems to be the only solution. Can the Narendra Modi government manage this near-miracle?<br /><br />(The writer, a retired IAS officer, is chairman of India chapter of the International Foundation of Aviation, Aerospace and Development)</p>
<p>The Tata Airlines was started in 1932 but post-independence, the government bought it over in 1954 and renamed it Air India (AI). By 1962, it became world’s first all-jet airline and was considered a jewel in the crown by independent India.<br /><br /></p>.<p>The AI had a paid up capital of Rs 154 crore which continued till 2004. Further, till then, the national carrier had never received any budgetary support from the government and it was able to purchase its aircraft and built its numerous properties out of its own funds. <br /><br />After the NDA government took over in 1998, it was decided to privatise state-run airline through strategic sale to an Indian entity which could also have a foreign airline as a joint venture partner. <br /><br />The process of divestment of AI was nearly completed in 2001 but fell through at the last minute as the joint venture partner pulled out and 9/11 incident in New York took place. The UPA government took over in 2004 and reversed the previous policy decision and decided not to divest the airline which was like a holy cow to them. <br /><br />No reasons were cited but this was followed by a decision to purchase new aircraft which had been suspended by the NDA government due to divestment. Since Indian Airlines, the other public sector airline, was also in need for a new fleet, a collective decision to order 111 new aircraft was taken on a ‘nudge’ by then civil aviation minister Praful Patel. This top down decision leaves a lot of unanswered question and former official Jitendra Bhargava in his book ‘Descent of Air India’ (not available in bookshops due to a case filed by Patel) has made a reference to it. <br /><br />Then came the final blow. A decision reportedly taken at the minister’s level but recommended by a compliant consulting company for a fee, it was decided to merge the two airlines. The merger was approved in 2007 but was implemented half-heartedly.<br /><br /> The new AI never recovered from this merger and it was losses all the way till the biggest bailout of Indian history of Rs 32,000 crore. In spite of this, AI has really not made any significant turnaround. <br /><br />This was further hampered by very large allotment of bilateral flying rights to a carrier in a Gulf country to sweeten a deal of an Indian private carrier. In contrast, the publicly-owned Japan Airlines was in a debt of about $5 billion, declared bankrupt but was bailed out and revived successfully by Kazuo Inamouri, the proven entrepreneur and founder of Kyocera and who was specially brought in for this purpose. It was revived within 12-15 months and is now in profits. The lack of will and desire to see through the merger and revival was clearly missing in the case of Air India.<br /><br />While AI is going through an ‘ICU’ liketreatment at public’s expense, it is also celebrating currently the 7th anniversary of its merger with IA which is a fitting tribute to the way tax payers money is being squandered! Further, not only its property assets are being sold, it is getting rid of its fleet by sale. Meanwhile, two new developments have taken place which will impact its recovery. <br /><br />The first is the sale of 24 per cent of equity of Jet Airways to Etihad and its de facto transfer of management to them, which makes Jet a feeder airline to Etihad with its hub at Abu Dhabi and the coming of Vistara, the Tata-Singapore Airline joint venture. The only redeeming fact in favour of AI is that is has finally joined Star Alliance, which will open up a new market provided it improves its performance and quality of service.<br /><br />Road map for aviation<br /><br />There is a need to lay a new road map for future development of international aviation in India. While expansion of aviation depends upon economic growth, a good international and domestic connectivity is a catalyst for growth. It’s a chicken and egg issue. However, past experience shows that city-states of Singapore and Dubai have managed high growth led by civil aviation as they developed their international air connectivity first which made it attractive for foreigners to come and invest in their country. <br /><br />India needs to think on these lines. A well-connected airport becomes a hub and helps growth of business and industry. With Jet-Etihad combination covering west and Tata-Singapore covering the east, it is only AI which can stop India from becoming a passenger-supplying country to Abu Dhabi and Singapore. Can AI achieve it at this late stage? <br /><br />The public sector carrier can still make it provided a complete organisational overhaul is carried out. It has to get out of public sector mould with seniority, nepotism, rigid rules and multi-unions with their extortionist agreements and strikes that kill initiative. It has to transform itself through financial engineering like its shareholding being handed over to public sector banks.<br /><br />Once AI reaches profitability it can also seek a joint venture with an airline beyond Gulf on the west or beyond Singapore on the east. AI now needs a strong counter to the new development of Jet-Etihad and Tata-Singapore carrier to ensure a growth of a hub within in India. Looking into the current situation, an early revival of this white elephant seems to be the only solution. Can the Narendra Modi government manage this near-miracle?<br /><br />(The writer, a retired IAS officer, is chairman of India chapter of the International Foundation of Aviation, Aerospace and Development)</p>
