An early obituary to a one-time leader

I propose to write its obituary a little prematurely and also hope and wish that it is not true.

Once India’s pride amongst international airlines, Air India was truly competitive. It never got any budgetary support in its entire life except for the initial equity of Rs158 crore. It was the first all jet airline in the world. But in the public sector mould it became a pawn in mismanagement by government. During early two thousand, in order to arrest its decline, it was decided to privatise it and a strategic partner was sought.

The best wooer was a partnership of Tata’s and Singapore Airlines and they were on the verge of selection when Singapore Airlines backed out for reasons not disclosed by them. While the Tata’s were allowed to look for another partner, the 9/11 incident took place in New York and no airline would come forward to join even the Tata’s of India. This was unfortunate because this was, perhaps, the best combination possible and Air India would have been a great airline today. Incidentally, even the 14 odd unions of Air India supported the then privatisation effort.

Post failure of privatisation, forces of vested interest took over and argued for its retention as a public sector airline with all its baggage which is peculiar to India (incidentally the two best airlines- Singapore and Emirates are both publicly owned).  The decline started in its maladministration. While the former minister has taken credit for the phenomenal growth which took place in aviation sector, thanks to the growth in the economy, he left a mess behind with the merger of Air India and Indian Airlines.
The order of 111 aircraft worth Rs 50,000 crore pre-merger, on sovereign guarantee, has made the government vulnerable in case of default by Air India, which could be a reality in near future. This brilliant piece of financial management, however, reduced interest burden.

Failed strategy?

Has the merger, which is now four years old, proved to be a failure? The Prime Minister stepped in unnecessarily. On August 15, 2009, the Prime Minister announced from the ramparts of the Red Fort that he will not allow the airline to die and it then became a policy statement of the government - a totally uncalled for objective. This opened up the floodgates of budgetary support which is now a life support system for the merged entity.

The just ended pilot strike is a manifestation of what all is wrong with Air India. Even after four years of merger, the two erstwhile airlines work in separate compartments. Air India and Indian Airlines pilots continue to have separate pay scales and unions. The erstwhile Indian Airlines pilots went on strike because they want pay parity with erstwhile Air India pilots. Justice  Dharmadhikari, a retired Judge has already been asked to look into such issues. While Justice Gita Mittal of Delhi High Court has asked them to go back to work, they have defied the order and their leaders are facing contempt charges.

In spite of this, the ministry has called them for talks without calling the management of Air India which gives them a special status. It may be recalled that in October 2009, the erstwhile Air India pilots went on a five-day strike on the issue of cut in their productivity linked bonus and, reportedly, due to interference from Prime Minister’s office the proposed action against them was not taken, with the management losing face. While pilots unions have been prone to strikes in many parts of the world, Air India’s pilots have been notorious in this respect. This is mainly due to soft governmental approach.

The Central Government has always capitulated against strong union activity. In the present case, with other airlines of India also running domestic and international services, there is no reason why a strong action cannot be taken, especially when the Delhi High Court has been so anti-strike and has even gone to the extent of saying that Air India pilots strike will not see another day.

As already stated it is not that private sector is better at management. Top airlines like Singapore or Emirates have government ownership. It is the soft state syndrome of the Indian Government that creates the problem.

Giving in to pilot demands every time in Air India has led to this impasse. In contrast, when in late nineties the Air Controllers went on strike, government took strong measures, invoked Essential Services Act and broke the back of their union. Soft pedaling of pilots’ various unions is no answer to bringing back Air India to any shape. That too when taxpayers money is being wasted.

Panacea

The only suggestion that I can give is that Air India be taken out of public sector mode immediately by some clever financial engineering as it has hardly any sale value.  For example, if Air India’s shares are distributed to all the public sector banks free on condition that once it comes back as a profit making company, its sale will take place and profits divided between government and the banks. It will then go out of public domain and become a private company. Efforts can then be made to revive it in a professional manner.

(The writer is chairman of International Foundation of Aviation, Aerospace and Development, India chapter and a former joint secretary of the Ministry of civil
aviation.)

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