'Air India should be sold, but I've been asked to keep it going'

New Delhi: State-owned Air India, the airline that operates domestic and international routes, is losing Rs 200 crore a month and urgently needs financial resuscitation. As the new Chairman and Managing Director Arvind Jhadav tries to put together a rescue package, fingers have been pointed at Civil Aviation Minister Praful Patel for several decisions in his last five years as minister that allegedly damaged the struggling airline’s competitive position. In an interview with senior editors of Business Standard, Patel discusses the airline’s problems and defends his record.

What do you think led to the financial crisis at Air India?
Air India has never operated smoothly. Its history shows that it has run well for some time and then again fallen. The reasons that dog the airline are the high cost of manpower and inefficiencies inherently built into the organisation, coupled with external factors like the slowdown. There are around 1,600 people who earn salaries of above Rs 25 lakh and more annually in the airline.

How do you justify the airline’s ambitious aircraft acquisition plan in 2004?
An attempt was made by the earlier government in 2003 to sell Air India, which did not fructify because Tata-Singapore International Airlines backed off. In 2004, when we took over, A-I was shrinking and it had only 23 aircraft. Indian Airlines was better off. They initially came to us with an order for 24 aircraft. Air India was asked to revisit its order, considering that the market was looking up and we were starting Air India Express. They increased the number of aircraft to 68 — 50 for A-I and 18 for A-I Express.

It seems bizarre that a business with a top line of Rs 16,000 crore should go in for capex of over Rs 40,000 crore to buy planes. How was it justified? Was there a financing plan in place, considering the low equity capital base? On the surface, it would look like a recipe for disaster.

This was always discussed in the government, that we cannot do business of this size without equity infusion. A very unfortunate part of government functioning is that we do not look at every aspect in one go. We decided in 2006 that we will come out with an Initial Public Offering (IPO) to bring in money for Air India. But that could not happen.
24/08/09 Business Standard

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Categories: NACIL Aug 2009