Can Air India be saved?

India’s new Civil Aviation Minister Ashok Gajapati Raju has said he doesn’t rule out privatisation of the ailing flagship carrier Air India. Raju is the second minister after Ajit Singh to float the idea of freeing up the white elephant from the government stable.

The terminally ill ‘Maharaja’ has been surviving on cash and equity infusion worth billions of rupees, but no amount of public money has been able to resuscitate the carrier which bleeds Rs50 billion a year. Debates have raged for long on whether Air India should be privatised amid fears that handing the carrier to a wrong investor could confine to history the national pride of yesteryear, like the case of Air Deccan and Kingfisher.

While nationalists argue the iconic airline should be allowed to keep flying at any cost, others are of the opinion that all white elephants in the government sector should be put to sleep. Why should taxpayers be penalised for the inefficiency of a bunch of bureaucrats? There are two breeds of public sector white elephants — one that is allowed to be so because of its social significance and the other being the creation of corrupt and inefficient bureaucrats. Air India belongs to the latter group.

When the North-East Line of Singapore’s metro system was inaugurated, Woodleigh was one of the stations where the government refused to stop trains. The reason given was it makes no economic sense to stop trains at a station where there aren’t much residential estates around. The government estimated that human resources and budgetary expenses required to man a station would be an economic waste. Commuters threw in the old myth that transit systems around the globe aren’t run for profits but for the benefit of society.

Despite protests, Singapore violated that paradigm and kept Woodleigh locked for eight long years till new developments and communities started to mushroom in the area. The administration of Prime Minister Narendra Modi, who reportedly believes in a market-driven industrial policy rather than handouts, can take a leaf out of Singapore’s book.

Air India suffers from manifold problems, such as a huge interest burden, poor aircraft utilisation, insufficient recapitalisation, regular government intervention, unbridled trade unionism, poor customer service, inordinate flight delays, a bloated workforce and a lackadaisical work culture, alleged corruption involving service cancellations to favour foreign carriers, bonanza for extended families of employees, et al.

Under such circumstances, the debate has shifted to whether there will be a suitor at all for the airline, which sits on a mountain of Rs450 billion accumulated debt, including an unsecured working capital loan of about Rs220 billion. At a time when the Indian skies are getting crowded with the impending arrival of AirAsia India and Tata-SIA airline and an increase in destinations and seat entitlements to Gulf carriers, Modi may have to turn to the Tatas, the original owner of the carrier which was nationalised in 1953, to restore the Maharaja’s lost glory.