Sunday, July 09, 2017

How AI crash landed

After amassing a debt of around Rs 52,000 crore, Air India (AI) is once again for sale. Prospective buyers are looking at various options, including buying the whole stakes. The government is yet to come out with the contours of the stake sale. Market leader IndiGo has made public its interest in buying AI's international operations as it plans to expand its business. Questions have also been raised as to why should the government run an airline. Some feel it is best left to the experts and the private sector.

Many talk about legacy issues, manpower pool, debt and how the national carrier lost out in the race. Lack of imagination at the top and the ‘chalta hai’ attitude of the workforce led to the downfall of the airline, many believe. The airline has a working capital loan of Rs 30,000 crore and Rs 20,000-22,000 crore loan on airline purchase.

The latest problem could be linked to the decisions taken during the UPA regime on aircraft purchase, lease of aircraft and giving up profit-making routes. The CBI has already registered three cases, saying these decisions had caused “loss of tens of thousands of crores of rupees” to the exchequer.

The CBI FIR states that the order to purchase 111 aircraft for Rs 70,000 crore caused financial loss to the “already stressed national carrier”. Initially, AI had not decided on buying so many aircraft. However, the number rose from 28 in 2004 to 111 later. The FIR states that leasing of a large number of aircraft without due consideration, proper route study and marketing or price strategy was unwarranted. Aircraft were leased even while the acquisition process was on.
09/07/17 Shemin Joy/Deccan Herald