NOSE DIVE

Sell Air India: It is costing us too much good money to keep it in the skies

Obsession
Modi's Moment
Quartz india
Obsession
Modi's Moment
Quartz india

I think we all agree that tax money must be spent in a manner that derives the maximum benefit to the nation, its people and society.

Yet much of this country’s tax money is being spent on funding white elephants like Air India. Yesterday, a few Air India officials met the new civil aviation minister seeking more funds. Again.

Narendra Modi came to power on the promise of “minimum government, maximum governance”. Under that philosophy, the civil aviation ministry should only regulate the industry and not run an airline. Especially, if it is sucking in scarce funds instead of contributing to the exchequer.

The stats are on my side:

  • Air India incurred upwards of Rs35,000 crores ($5.9 billion) in losses in the last 6 years. Last year alone, it incurred a Rs5000 crore ($843.4 million) loss.
  • Air India has Rs44,000 crore ($7.4 billion) of debt, forced upon the banks by the government. If you add other debts, it would be in excess of Rs60,000 crore.
  • Air India has not shown that it can deliver better results. In 2012, when the government extended the ailing carrier a lease of life with a massive bailout package, it was required to meet performance targets. The very next year, the airline missed them by a significant margin. For 2013-14, the airline overshot the budgeted loss by 26%. It missed its revenue target of $3.2 billion by 10%.

Every new minister and management is only buying time and hoping for the best. Little is being done on the ground to turn the large company around. There is no time-bound commitment on results.

The losses of 2013 alone are more than the total higher education budget of India. This should make us think hard about our priorities.

The funding is against the rules of competition, and is leading to an unfair advantage for the government-run carrier. By offering an unending flow of funds, the government is making the entire aviation sector sick.

India’s fliers don’t really need Air India. It has 20% market share while the combined unutilized seat capacity of other airlines airlines is upwards of 30%. More airlines are on the way from Air Asia and the Tata-SIA alliance.

Many years back, the NDA government came out of the hospitality business by divesting stakes in its hotels. It is time to do so with airlines, too.

If Air India was a private airline, it would have gone the Kingfisher way a long time ago. Many private airlines went under amid inefficiency, yet we continue to tolerate Air India.

I am happy to pay even more taxes, but as a people, we have a right to demand that funds be used efficiently and for the benefit of the people of this country. Many can derive genuine benefit from these funds. We need new colleges, homes and hospitals. The last thing we need is a state-run airline.

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