Every day seems to bring bad tidings about the ailing Air India (AI). Now, senior pilots too have come out in support of the ongoing stir - and civil aviation minister Ajit Singh has admitted that the merger of Indian Airlines and AI five years ago hasn't worked. But the government continues to attempt only cosmetic changes, and consequently we must bear witness to the unedifying sight of pilots holding it hostage. It cannot wish away the cancer that is eating away at our national airlines. It must face the crisis squarely.
Let's do a reality check. The airline has a whopping Rs 40,000 crore debt. One can easily start 80 airlines with that money. It is unsustainably overstaffed - 475 employees per aircraft as against 70 in Indigo. And if one considers that normally about 30% of AI aircraft are on the ground because of slack maintenance, the number of employees per aircraft becomes even more shocking.
Employees are demoralised with the lack of leadership and riven by factions. AI's cost per available seat km (CASK) - the industry benchmark globally for measuring airline efficiency - is probably the highest in the world. It is four times Indigo's and five times Air Asia's. Inexperienced bureaucrats, usually political appointees, have been heading the airline with neither autonomy nor accountability, and have run it into the ground.
Political interference by successive governments has wrecked the airline - and this is unlikely to change. It is a reality we must face. Like all government-run companies, AI has a 'cost plus' culture and there is no accountability or fear of bankruptcy at any level. Employees are confident that in the end, the government will buckle and bail them out. Two sluggish, blundering dinosaurs have entwined themselves and are sinking into quicksand.
Is there no way out? There is - if the political wisdom and will can be found. AI is in no worse state than British Airways or Lufthansa were when they were on the verge of bankruptcy and therefore privatised two decades ago. It has huge assets in land, buildings, engineering, bilateral grandfather rights, slots and extensive network - and it is still a powerful brand. It can be hived off into three separate entities.
All of AI's land and buildings across the country can be put into a separate entity. From that sale, all surplus employees who have to be laid off can be compensated with a golden handshake. It would probably still leave some extra cash in the kitty as AI holds prime real estate. If there's a shortfall, the government can pitch in. It's better than throwing Rs 30,000 crore into a black hole and a few thousand crore every year ad infinitum as AI will continue to lose money when pitched against private airlines.
After that, the government would be left with an airline with lean staff levels, only the operational assets necessary to run it and sustainable debt. This can easily be sold off for a premium, as it would be a very attractive proposition for any investor. As for the third entity, while AI is overstaffed and filled with deadwood, it also has excellent people in engineering who can be cherry-picked. Taken together with AI's massive invest- ments in maintenance, repair and overhaul (MRO) and engine shop, they could form Air India MRO. This could then be privatised as was done with Lufthansa Technic after it was hived off from Lufthansa Airlines.
If this is done wisely, it will not only staunch AI's conti-nued bleeding but also benefit the government in the form of annual revenue as against the current losses. This was seen in case of Maruti Suzuki when it was sold to Suzuki in stages. But if this isn't done, the bleeding will continue. Nothing has changed structurally and the way AI is managed is inherently flawed, leaving it incapable of facing fierce private competition.
The government must also go beyond just solving the AI mess. It must create a vibrant aviation sector and spell out a long-term strategic vision for all stake-holders - air cargo, MRO, manufacturing of components for aircraft and airports (which have become monopolies). A robust ecosystem is needed, not indivi-dual policies to suit AI or Jet Airways or Kingfisher Airlines, as has been the case with successive governments.
Less than 3% of Indians can afford air travel. Last year, only 50 million domestic passengers flew. To find the right answers, the government must ask the right questions: What policy framework and incentives do we need to take it to 20% in the next five years? How do we make India an international aviation hub for passengers, design, manufacturing, MRO and cargo along the lines of Singapore, by taking advantage of our technical manpower, natural resources and growing economy? Should aviation be treated as core infrastructure?
But first, realisation must dawn on the government thatAI is not India and that the larger interests of the country are more important than one airline's interests. AI is just another company; it cannot be mortgaged to mollycoddle unions and a few belligerent employees. The government must not lose sight of the bigger picture. It must exit the airline business immediately.
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