This Maharaja has no clothes: Which fool will buy Air India?

 

The aviation minister says it's unsaleable

Last week, the Union civil aviation minister Ashok Gajapati Raju himself admitted that Air India's books are so bad that no one will come to invest or purchase it. "Finances of Air India are so bad that nobody might come to invest or purchase it even if it is put on sale by the government. However, at the same time, public money cannot be pumped into the airline forever."

 

Read more: The Maharaja and 26 other sick PSUs to finally take a bow

 

 

 

No profits, huge costs and debt

Due to the epic fall in oil price (fuel prices constitute around 40% of Air India's operating cost), the airline managed to make a tiny operational profit of ₹8 crore last year after nine long years.

 

The airline sustained losses of ₹6,279 crore during the financial year 2013-14, which came down to ₹5,859 crore in 2014-15 and further to ₹2,636 crore in 2015-16 (again not due to operational efficiency but because of the fall in oil prices).

 

Over the last 10 years its losses average around ₹4,500 crores per year. At present, it has a debt of ₹51,367 crore  and an operating cost of ₹23,951 crore.

 

No turn-around despite Rs 30,000 crore bailout

 

In April 2012, after reviewing its abysmal financial condition, the government approved a turnaround plan of providing equity infusion of ₹30,231 crore up to 2021, subject to the achievement of certain milestones. The government has so far infused equity of ₹22,565 crore in the airline.

 

It has not made much difference so far. 

 

Failure of the Air India-Indian Airlines merger

In 2007, despite huge employee misgivings, the government merged Air India and Indian Airlines. The move has backfired big time now.

 

Many CEOs of the airline, including the current Ashwani Lohan, have openly admitted that the current financial crisis in the airline is a result of the failed merger. Post the merger both airlines lost their erstwhile dominance and the integration of employees and operations was a nightmare and badly handled.

 

The merger brought together two disparate entities and created a behemoth of 30,000 employees and necessitated operations that include both Airbus and Boeing planes which is unviable as India is a price-sensitive market, and a model built around a single aircraft type makes much more sense. 

 

 

Controversial $11 billion purchase of 68 Boeings

Both the Central Bureau of Investigation (CBI) and the national auditor the Comptroller and Auditor General (CAG) have investigated this controversial purchase and the CAG said in its 2011 report that Air India was forced to buy these aircraft from Boeing in a hurry.

 

It also detailed events that led to the company’s ambitious $11 billion purchase on a paltry equity base of $34 million. It said that in 2002-03, Air India (the combined entity of Indian Airlines and Air India) lost just ₹63 crore. This ballooned to almost ₹7,000 crore in 2010-11. CAG head Vinod Rai directly accused ex-aviation minister Praful Patel of pushing the deal.

 

 

 

 

Intense political interference

Many experts, employees and senior executives have wondered if Air India is just an airline or a putrid amalgamation of vested political and bureaucratic interests. As ministers and bureaucrats across political parties and portfolios have demanded free tickets, trips for families, upgrades and even used whole planes for non-official purposes.

 

 

Notoriously callous crew and politicised unions

The airline is filled with unions that hold it for ransom at their whim. The pilots and cabin crew are famous for taking their duties very lightly. There have been instances where a full flight has been stranded on the tarmac because the cabin crew that is supposed to be on-duty went sightseeing.

 

Senior pilots, who are paid big fancy salaries, have engineered strikes that have crippled airline operations and resulted in major monetary losses. The directorate general of civil aviation says the airline has the highest number of passenger complaints.

 

 

Lack of leadership

The government has been unable to find a reliable leader who can take Air India's problems head-on, withstand tremendous political pressure and turn the airline around. Over the last couple of years, six senior IAS officers have tried and failed.  The current incumbent, Ashwani Lohani, has read the riot act and tried to contain erring employees but he has his task cut out.  

 

Amusingly, among his many dictates was a rule asking pilots to say 'Jai Hind' prior to take off, which he claimed helped morale. 

 

 

 

Images courtesy: Guruprasath R