Air India: sell it or shut it down

Air India Airbus A320-200 aircraft REUTERS

The government’s plan to make another rescue bid, by way of yet another bailout package, for the state-owned carrier Air India is wrong and most ill-advised. It defies all norms of financial management and common sense to throw more good money into a losing enterprise that has no chance of becoming viable. All hope of running the airline profitably had been lost and that was why the government had decided to go in for its disinvestment early this year. The move came a cropper because the government did not make it attractive enough for any potential bidder. There was not a single expression of interest even when the deadline was extended. This was because the government wanted to keep control over the airline by keeping a 26% stake even after disinvestment. Also, the buyer had to absorb Air India’s over Rs 30,000 crore debt. 

When the move failed the government had termed it a learning experience. But it does not seem to have learnt anything. The package being readied to prop up the airline is big and is said to include a Rs 30,000-crore loan write-off and cash infusion of Rs 10,000-11,000 crore. All accumulated losses of the airline, which has been losing Rs 15 crore every day, will be written off. All the money that is proposed to be written off and is being given to the sinking airline is public money. The government has no right to be profligate with taxpayers’ money. The UPA government had made a capital infusion of over Rs 30,000 crore into Air India in 2013. This had no positive impact and the losses only kept increasing. The airline has not even been paying salaries to its staff regularly and in time. It has been reported that the government decided to offer a big package because small cash infusions have not worked. This is perverse logic and shows a very irresponsible attitude to the use of public money. Air India’s problems are deep and systemic. It is most unlikely that it can be nursed back to health. Money cannot do it, as has been proved in the past. It is not an essential service to be kept running in public interest. 

The only option for the government is to offer the airline again for sale with better terms and conditions. If it cannot sell the airline, it should be shut down forthwith. The government should not run businesses, and the Air India experience demonstrates this principle like no other does. 

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Air India: sell it or shut it down

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