On a wing and a prayer

As the government submits yet another revival plan for Air India, the state-owned airlines finds itself facing Hobson’s choice. It needs to enhance its performance to appeal to buyers, after a high-profile failure last year. But as long as the government remains an owner, the chances of achieving the private-sector standards of profitability and productivity to attract buyers are slim. This is not for want of trying. Earlier this week, Civil Aviation Minister Suresh Prabhu said the state-owned airline has launched a global search for professionals to fill top positions in the airline. A few days earlier, the airline’s chairman and managing director published a piece in the airline’s monthly magazine asking the 20,000 employees to step up to the plate. “We all have to tighten our belts, adopt strong fiscal discipline and streamline our functioning without compromising on our operational efficiency. At the same time, we need to generate revenue in every possible manner to stay afloat,” he wrote. Junior aviation minister Jayant Sinha has spoken of “differentiated strategies” for its core businesses, and “robust organisational reforms”.

Given that the airline is surviving on taxpayer money, these are unexceptional goals, as is the plan to hive off the Rs 55,000 crore debt into a special purpose vehicle. The question, however, is whether such an ambitious agenda can be fulfiled. To be sure, CEOs with deep experience in the global airline industry have been part of the Indian aviation landscape since the industry was opened to private sector investment in the nineties, with someone like Wolfgang Prock-Schauer having done the rounds from Jet Airways to GoAir and now IndiGo. But they have been happy to join airlines that operate on commercial lines, within lean and competitive strategic paradigms. It is also worth noting that several of these executives quit owing to the hands-on approach of the airlines' owners. But Air India is sui generis. If government ownership continues, it is unlikely to be an attractive proposition for any proficient private sector executive, let alone a foreign one. The prospect of the government as a residual shareholder scuttled privatisation efforts last year. No less formidable are the airline’s feisty, deeply politicised multiple unions, legacy costs and culture and status as the default choice for ministers and bureaucrats. The combination of these factors made it impossible for Air India to make profits even in good times, even when it was headed by reasonably competent bureaucrats appointed by the government.

The airline made a net loss of Rs 6,288 crore in 2016-17, the last declared results, when the industry was in an upcycle. Finally, the recent history of private-public corporate ownership in Maruti Udyog, in which the government raised many hurdles before Suzuki could take full control is unlikely to enhance a private buyer’s confidence in operational autonomy. The problem for Air India is that the airline needs to take the kind of hard commercial decisions — cost-cutting and downsizing — that are taken for granted in the business world. It will take an intrepid investor indeed to commit investment to such a large undertaking, that too at a time when the outlook on oil prices presages challenging times for even private sector competitors, Jet Airways being a prominent example. With parliamentary elections due, the government is unlikely to make any drastic moves on Air India. But for any incoming government faced with the challenge of kick-starting the economy, bankrolling Air India may no longer be an option.



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