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Fixing Air India’s future more important than past PDF Print E-mail
Wednesday, 31 May 2017 08:33
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It is not clear what the CBI case will achieve, more important to use Jaitley formula for the white elephant

Air India has always meant different things to different people. For many, it is the symbol of everything that is wrong with PSUs, so much so that even after getting Rs 24,000 crore of free money from the government over the past few years, it is not in much better shape even today—indeed, its chief Ashwani Lohani is trying to petition the government to get PSU banks to convert a large part of their Rs 50,000 crore debt into equity; once the debt overhang is fixed, he says, the airline will be profitable. If the government does not privatise the airline, according to this lot of observers, it is going slow on reforms. For an equally large number of people, Air India represents all that was wrong with the UPA government. It made money on the large number of aircraft it forced the airline to buy and, in doing so, it saddled it with the kind of debt it simply could not possibly service; indeed, the corruption of the UPA extended to forcing Air India to give up part of its lucrative bilaterals and to even stop flying certain profitable routes, adding to its financial woes.

The CBI probe into aircraft deals during the UPA tenure, announced by the agency on Monday, is in response to this—as of now, the cases that have been registered against unknown officials of Air India and the civil aviation ministry include the purchase of 111 aircraft for Rs 70,000 crore in 2006, leasing of aircraft and surrendering of profitable routes. It is not clear what can be proved over a decade after the event, especially since, in the case of the aircraft purchase, it is difficult to conclusively show the absence of route-planning that is being alleged or to prove that the wrong configuration of aircrafts were ordered—after all, all purchases would have been based on a certain view of how the market was going to shape up. Similarly, while the CAG has, in the past, said giving up bilaterals caused a loss to Air India, it cannot be denied that not releasing bilaterals limited the number of aircraft seats available for Indians.

While the final view on the CBI probe will have to wait till the agency is able to prove its charges in court, it is more important to secure the beleaguered airline’s future. Though some in the NDA are convinced good management can turn Air India around, finance minister Arun Jaitley had the best comment on the government’s third anniversary. If, he said, 86% of the country’s air traffic could be handled by the private sector, there was no reason why it could not handle 100%. Many have argued the government can’t sell Air India since there are no buyers. Finding a buyer, though, depends on how the sale is pitched—if, 10 years ago, a buyer was assured the government would give it Rs 30,000 crore in cash, the response may have been different. A sale today could be sweetened by offering Air India’s bilaterals or by absorbing a part of its work force—how the government structures the deal is important. Given there is no guarantee Air India will turn the corner, going ahead with more aircraft purchases and debt restructuring as planned, is a bad idea.

 

 

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