Click to play videoWith national carrier Air India in a financial tailspin, the Indian government now contemplates a bailout to the tune of thousands of crores of rupees. Should the taxpayer compensate for what appears to a clear case of lax management?
The critically ill Maharaja of Air India can breathe easy for the moment as Civil Aviation Minister Praful Patel has assured that the airline will get the support of the government but only if the airline goes for some serious cost rationalising.
CNN-IBN’s Face The Nation debated: Should the government bailout Air India?
The panel of experts comprised of Chairman and MD Deccan Aviation Pvt. Ltd Captain G R Gopinath; Former Civil Aviation Secretary K Roy Paul; Former MD, Air India, V Thulasidas and senior journalist and aviation analyst, R Krishnan.
Many would say that the writing on the wall has been for a while. Why is it that the government waited for the mark to hit the ceiling for carrying out the surgery as it is now carrying out?
Responding to the question, Roy Paul said that he personal felt that many wrong decisions were taken over the last few years for which even the government could not escape responsibility. He added that the expansion was at an unsustainable pace without proper planning. “The shot-gun marriage of Indian Airlines and Air India was not a workable issue,” he added.
Air India-Indian Airlines marriage
The government being the sole shareholder of Air India should have known what was wrong with the airline. Did the national carrier die due to the inconsistent efforts of the politicians and bureaucrats?
Roy said, “I was secretary of Air India five years ago at which time Air India was making profits. The expansion happened later, so I can’t take the blame.”
At this point, the question was put to Thulasidas who felt that so many questions were being raised on the issue because Air India is a public sector airline and because similar problems are being faced by private Indian airlines and several international airlines. He argued that all the private airlines had also gone for expansion of capacity on a substantial scale. “The public sector is not so bad. In spite of the global recession, India has been able to grow economically because of the public sector. Air India had to go for expansion because of the market’s demand,” he added.
Thulasidas went on to say “The merger of Air India and Indian airlines was a merger of two networks. Air India had a pure international network. Indian airlines had an exclusive domestic network. No airline in the world at that time had an exclusive international network. Only two airlines, Pan-Am and TWA, had such a network and they don’t exist today. Air India could not have survived without the strength of a domestic network,”
R Krishnan did not agree with Thulasidas’ argument. He said, “The issue is not merger per se. The issue is there has been no integration after the merger whatsoever. There was a report made about five years ago which had stated that there should be different of routes for Air India and different route for Indian Airlines. Why was it not accepted? After the merger the losses made by Air India and Indian Airlines in the first year was Rs 750 crore, how come in the second year you have Rs 4000 crore. This is something inexplicable.”
He went on to say, “The government officials knew what was happening. To say Air India did not inform the government is wrong. There is something wrong with the government employees themselves.”
Bureaucratic negligence
Air India story underlines the stereotype of public sector unit not being able to carry out the legacy of problems that public sector units have carried.
Gopinath agreed with what Mr Roy had to say regarding Air India being run as a government department. He said, “There is not accountability. Normally, IAS people are brought it who are there for a short period by they time they get a hang of it, he is transferred. They do not have autonomy. The CEO operates with his hands tied unlike a private company CEO. Air India’s cost base is very high. You cannot expand a consumer base with a high cost base. The government must bailout because they are the shareholders but they must completely restructure and revamp the management.”
The government should be looking to replicate the Satyam experiment in Air India, get on people who are experts in the field to try and get Air India out of this mess. Private companies can take charge of some responsibilities.
Gopinath said, “If the government brings in accountability and brings in professionals it should be able to leverage Air India and allow them to perform.”
Many are saying that the opening of the skies was done in such a manner that it left the national carrier with no level playing field.
Krishnan said, “People of India need to know that they need not be in the mercy of any airlines in regards to their flying. Traditionally, it was Air India, all the international routes were connected by that. There should have been some regulations which did not happen.”
Does India need a national carrier
Why do we need a national carrier? It is not of strategic importance to the government. Does India need a national carrier or can we do away with it?
“The discussions seem to indicate that only public sector airlines are incurring losses. Every single airline in India is incurring huge losses. No one is making money. If Air India has deferred salary so has one airline, another airline has cut 25 per cent of top manager’s salary. The leasing companies have taken back planes which could not pay the leasing charges,” said Gopinath.
Will the government be able to ensure the riders on restructuring of Air India given all the union pressure?
Roy said, “I don’t think that there is any problem with unions. Unions always oppose any kind of scaling down. Rather than that, other issues such as the cost factors need to be addressed.”
On asked where he would like to take the responsibility of lift Air India out of its mess, Captain Gopinath said, “I wouldn’t want to do that now. When Air India losses money, it the tax payers money that’s the reason why you cannot support it. Having said that, Air India has a great brand, great heritage.”
Final words came from Krishnan saying, “Yes other airlines are also making losses, but when government of India’s airline makes a loss, it is a public issue. Secondly, as far as the cabin crew is concerned, they get less pay in private airlines. Why is it so?”
Final results of the SMS poll: Should the government bail out Air India?
Yes: 45 per cent.
No: 55 per cent.
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