State airlines are a defunct idea
The Centre must shut down AI if it fails to find a buyer
National carrier-turned-national embarrassment Air India (AI) is once more being cleared to fly towards privatisation. The Cabinet has cleared the setting up of an inter-ministerial group to look into the government’s future options regarding the loss-making airlines.
ourtake The endgame seems to be to eventually divest the government’s stake in the public sector enterprise, effectively ifb privatising the airlines. If there is a sense of déjà vu, it is because going back to the PV Narasimha Rao government, the idea of divesting AI has been considered by repeated governments before – and eventually gotten nowhere. The Modi government has both the political mandate and a record of implementing policies that hopefully will make this attempt to close the sorriest chapter in Indian civil aviation history to a close.
The government’s overriding reason for wanting to get rid of this red-and-white albatross around its neck is the staggering financial losses that AI has wracked up. The carrier has been living on a ₹30-billion government bailout. But the bailout will inevitably require another one as AI flies more on red ink than it does aviation fuel. Despite record low fuel prices, the Comptroller and Auditor General concluded it failed to make an operating profit last year. More troubling is that the enormous ₹50 billion debt that the carrier has accumulated is simply impossible to pay off without government assistance. To put it another way, the bailout AI is living on right now would be enough to feed the country’s 200 million hungry for two years.
The more fundamental question is why India needs a Stateowned airline in the first place. The country today has a halfdozen globally competitive private airlines which could easily fill in any market share vacated by AI. National carriers are a defunct concept leftover from the 1950s – dozens of countries including the US no longer have one. There is literally nothing AI does that India’s private carriers could not do better – and without burdening the Indian tax payer. Air India has long survived on the strength of its political connections. One reason it never bothered to reform itself. The repeated cases of passenger rage by Indian politicians are a direct result of the VIP culture promoted by AI. The question will now be whether there is sufficient political will to genuinely divest, privatise or even – if no buyers can be found -- close down what is little more than an employment guarantee scheme for the upper class.