In India, we seem to specialise in ruining great institutions. Nothing illustrates this better than the destruction of Air India, established in 1948 as a joint sector corporation between the government and Tata Airlines. Five years later, the government decided to nationalise the aviation business through the ‘backdoor’ as the legendary JRD Tata complained to Prime Minister Jawaharlal Nehru. Nonetheless the government looked to JRD for advice and appointed him chairman of the international airline, a post he retained until he was turfed out by Morarji Desai in 1978.
Those were Air India’s glory days, with Tata writing regular notes to the airline management on everything from refreshments to the hair-dos of the air hostesses. Tata was the custodian of Bobby Kooka’s mascot, the gracious, hospitable, ever-smiling Maharajah, a job he took very seriously. I’ve travelled on Air India frequently and experienced the deterioration over the years. I recall once after Air India did its first logo change, I was travelling first class and the seat cushioning was so thin that I could feel the boards beneath. I complained to the steward, only to be told with a wink and a nod, “What can I say sir, it went for refurbishing and the management reduced the cushioning by two inches thinking nobody would notice.” When the crew start talking to passengers against the management you know the airline is doomed. Air India has an accumulated debt of Rs 52,000 crore and annual losses of Rs 3,000 crore every year. Its service is erratic, its pilots often capricious, its cabin service atrocious and the food inedible. Besides, it is frequently engulfed in scandal. As finance minister Arun Jaitley correctly said recently: “If 86 per cent of the flying can be handled by the private sector, why not 100 per cent?”
The airline has witnessed a series of terrible decisions. Two stand out. The acquisition of 111 aircraft for Rs 70,000 crore in 2005-06 at a time when it was deep in the red, and the merger of Air India and Indian Airlines in 2007 under the brand name Air India. While the measure aimed to create an aviation mammoth that would leverage on synergies, it only helped birth another entity that was a drain on the public exchequer. In 2002-03, the combined unit of Indian Airlines and Air India lost Rs 63 crore. By 2010-11, the losses rose to nearly Rs 7,000 crore, making a mockery of the airline’s plan to turn profitable three years following the merger.
In the past, there have been calls for privatising Air India, but these have encountered stiff resistance. A proposal to sell its real estate assets, which would have raised Rs 3,500 crore, was considered in 2011 but only partially implemented. Now the government is contemplating strategic disinvestment, which seems well timed given the civil aviation boom in India and the growing demand for cheap but quality flights. The cover story, written by Group Editorial Director Raj Chengappa, examines the options before the government and what is at stake. In 1994, Chengappa had reported for india today on the Open Skies policy that ended the monopoly of the national carrier. Twenty-three years later, he analyses what the end of the government monopoly on the airline means for the aviation business.
For the Narendra Modi government, which has so far not delivered on its campaign promise of ‘the government has no business to be in business’, this is a signature move for which it must be lauded. If it succeeds, it would have done what every other government has thought of doing but never had the courage to do. Given Air India’s visibility and intractability, it would send a signal across the world that India is serious about economic reform. Hopefully, the government will go on as it has begun and eliminate the many other white elephants we pay for.