For a government that runs deficit-ridden, debt-fuel-led budgets, the current dispensation hardly behaves like money is a problem. Recently, the civil aviation ministry announced a Rs 30,000 crore bailout plan for Air India. This, after half a dozen previous bailout plans have not worked.
Thus, we will pump in billions of rupees now – and we don’t know, but maybe in a couple of decades the airline that has never made money could make some money. There is little outrage about it. More money flushed down the toilet for the sake of the bleeding machine called Air India doesn’t even make news.
I am no aviation expert, but i have worked in the distressed debt department of a bank where we invested in troubled companies. I am willing to place a bet – Air India cannot and will never make money. It will also never be able to repay its lenders. It is a loss-making monster that is made bigger every year with more good money thrown after bad.
Its current debt is over Rs 67,000 crore, a shocking amount for any airline in the world. At market rates, it needs to make operating profits of around Rs 7,000 crore per year to pay the interest on this debt alone, let alone repay the principal. It is good to restructure companies, but not every one of them can be. Air India cannot be revived without massive write-offs, changes in management and, essentially, starting afresh.
What is baffling is there is no extraordinarily strong rationale to save Air India at this cost. Sure, there are employees whose jobs are at stake, but that applies to almost every company in the country facing failure. Should the government fund every loss-making enterprise to eternity, then?
Neither does the flag carrier argument hold anymore. There is hardly any national pride in running a commercial airline that ferries people from Delhi to Goa, something many other private carriers do more efficiently. Air India is not the Indian Air Force.
And yet, we burn money in the name of saving an air-line that cannot be saved. The Rs 30,000 crore could have been used to open thousands of schools, hundreds of hospitals and make highways. Spending it on a company with full know-ledge that it cannot be revived is irresponsibility only a nation of simpleton voters like ours seems to forgive.
In fact, keeping a subsidised but inefficient airline like Air India in the aviation space hurts the private players. With no sugar daddy government to support the low-cost carriers, there is no level playing field. This will hurt the sector and mean less capital for the private players to expand.
The Indian government’s schizophrenic approach to capitalism is chronic. It has hurt many sectors; aviation is just one of them. The government wants free markets as long as it has the right to interfere and shove decisions down people’s throats. This turns off foreign investors. Even if the government opens aviation to foreign players, it will find few takers given the unfavourable environment.
Why then do they keep Air India going? Well, i’d like to illustrate why with an anecdote. A few years ago, i was travelling on a Delhi-Mumbai Air India flight. I met a friend, also on the same flight, at the check-in counter. The friend’s father was an IAS officer posted in Delhi. The mere mention of the friend’s father’s name made the staff stand up. My friend had an economy ticket, but was automatically upgraded to business class. He even offered me an upgrade, which i declined as it seemed too awkward.
I was stunned at how even a government official’s child could obtain upgrades. I can only imagine how Air India’s staff fawns when a minister or his mother-in-law arrives for check-in. I don’t think Indigo would care as much. That is the reason the government loves Air India. Frankly, that is also the reason Air India never makes money. Air India is our babu-and-neta’s club in the sky. If it goes, they will have to stand in line like the rest of us and pay for their own sandwiches. They won’t get any upgrades and neither will the plane wait for them if they are late.
Our babus, netas, their families and virtually every contact in their phonebooks can take advantage of their platinum status on Air India. I know of its pilots taking food from Delhi’s restaurants on Pandara Road for government officials’ kids working abroad. You think a Spicejet pilot would do that?
These wonderful benefits – obsequious service, automatic upgrades and treating the airline like a charter – will disappear if they do the right thing and close Air India. But what is Rs 67,000 crore of existing debt and Rs 30,000 crore more for the lovely palak-paneer served in business class?
Our leaders and the people in power have become brazenly callous. Whatever power they can abuse, they will abuse. One can only wish they were truthful about it. There is no restructuring or revival package story in Air India. It is simply a package to keep the party going at taxpayers’ expense. Fasten your seat belts and unfasten your purse strings for our netas. Have a nice flight!