Time we privatised Air India

The Air India saga goes on endlessly. There is no possibility of the airline's continued survival except on the basis of open-ended and unlimited budgetary allocations. Its accumulated losses (before tax) for the three years, 2007-08 to 2009-10, are more than Rs. 15,000 crore. Its net worth, despite repeated capital infusion by the government was negative to the tune of Rs. 4,481 crore in 2009-10, and it employs 256 personnel per aircraft against the industry average of 156!
The various turnaround plans prepared by outside agencies and experts are virtual non-starters as their implementation requires a modicum of normal corporate behaviour that is apparently not possible in a politically vitiated and demoralised environment. The Maharaja is not just sick; it seems to have entered a stage of terminal decline.
It will be unfair for the government to now ask public sector banks, led by the SBI, to mobilise funds for equity participation in the company. Unlike Kingfisher Airlines, where such an approach has been adopted, there is no viable plan or strategy in place or even in sight to bring Air India back to profitability. Not only is Air India's net worth negative, it has huge outstanding payables to other public sector entities like the oil companies and the Airports Authority of India. There is a danger that this one haemorrhaging company could pull others down with it as well.
Air India has been financially bankrupt for several years. As a private company it would been closed long ago. Its continued operation with access to virtually unlimited amounts of public resources is a source of major distortions in the industry and can effectively prevent any Indian airlines company from becoming globally competitive.
09/07/11 Rajiv Kumar/Business Line

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Categories: Air India Jul 2011