How AI crash landed

After amassing a debt of around Rs 52,000 crore, Air India (AI) is once again for sale. Prospective buyers are looking at various options, including buying the whole stakes. The government is yet to come out with the contours of the stake sale. Market leader IndiGo has made public its interest in buying AI's international operations as it plans to expand its business. Questions have also been raised as to why should the government run an airline. Some feel it is best left to the experts and the private sector.

Many talk about legacy issues, manpower pool, debt and how the national carrier lost out in the race. Lack of imagination at the top and the ‘chalta hai’ attitude of the workforce led to the downfall of the airline, many believe. The airline has a working capital loan of Rs 30,000 crore and Rs 20,000-22,000 crore loan on airline purchase.

The latest problem could be linked to the decisions taken during the UPA regime on aircraft purchase, lease of aircraft and giving up profit-making routes. The CBI has already registered three cases, saying these decisions had caused “loss of tens of thousands of crores of rupees” to the exchequer.

The CBI FIR states that the order to purchase 111 aircraft for Rs 70,000 crore caused financial loss to the “already stressed national carrier”. Initially, AI had not decided on buying so many aircraft. However, the number rose from 28 in 2004 to 111 later. The FIR states that leasing of a large number of aircraft without due consideration, proper route study and marketing or price strategy was unwarranted. Aircraft were leased even while the acquisition process was on.

The airline also gave up profit-making routes and timings in favour of national and international private airlines – 12 international and domestic routes, including Bengaluru-Bhubaneswar and Bengaluru-Ahmedabad sectors. The FIR is damning on the decision making process when it states, “It is claimed that on the directions of the Ministry of Civil Aviation, issued in conspiracy with private domestic and foreign airlines, Air India withdrew its services from many profit-making routes and gave away its routes to private and foreign operators without taking any reciprocal benefits”. The FIR further states that “private airlines, namely Jet Airways, Kingfisher Airlines (now defunct), GoAir, IndiGo, SpiceJet, Paramount Airways etc., started operating and made profits” on routes vacated by AI. On lucrative routes like Mumbai-Dubai or Mumbai-Ahmedabad, AI reduced flights and gave “its opponents a major market share”. Foreign airlines were given unrestricted entry into India and major routes were given to them without taking any reciprocal benefits for the national carrier.

These are still allegations yet to be proved in a court of law. But if true – several AI watchers vouch for the veracity – it shows how systematically the national carrier was made a deadwood. Left parties have already raised a hue and cry over the disinvestment plan. The CPM says Air India was “crippled and burdened” with debt due to “monumental miscalculation and certain wrong decisions taken by successive governments at the Centre” and the airline is now being made the “scapegoat and sought to be privatised”.

It appears that the national carrier was treated by the government as something that should be sold at any cost. While the government should not discriminate private players, many actions taken were counter-productive to AI. The airline was not allowed to flourish, with roadblock after roadblock hampering its growth. However, in the past couple of years, the airline was on a recovery path and had posted an operational profit. The question is how did AI amass such a debt? Why did it land in such a financial mess? Why is Air India not the preferred airline? Is only the UPA regime at fault? Did the decision not to buy aircraft between 1998 and 2004 have a negative impact on the national carrier? Who is responsible for this? The country needs to know as the national carrier is now for sale.
DH News Service