Tuesday, April 10, 2018

Any more delay in disinvestment can lead to Air India’s unnecessary extinction

Political discourse has reached such absurd proportions in our country that it is becoming increasingly impossible to expect a consensus on any issue. The disinvestment of Air India could be a potential victim of the lack of any such consensus in the coming months.

One’s confidence has been significantly dented because since the release of the expression of interest document on March 28, it has led to politicians of different hues expressing their views about how to serve not necessarily Air India’s interests, but their own.

Their ‘love’ for Air India is either misplaced, or they are demonstrating their lack of knowledge of the aviation sector. These politicians are apparently not even aware that by procrastinating the inevitable — disinvestment — they are harming Air India’s future. They are apparently still of the view that Air India operates in amonopoly era, and external factors like growth plans of private airlines have no impact on its ability to retain market share and survival.

Their clamour for government retaining ownership in today’s competitive environment is no solution. Let us look at the hard facts. Air India is currently patronised by one in seven air passengers. In the next three to five years’ time, this will probably shrink to one in 10 passengers, or even less.

This is because while private airlines, which have pending orders for 900 aircraft, will add capacity to enhance their respective market shares and network in the coming years, Air India will correspondingly lose out. Unless, that is, the government takes care of the current debt of about $7.8 billion, as well as assures funding of aircraft acquisition in the future on a sustained basis through investment of thousands of crores of rupees — both of which, however, is unlikely.

This flight path, as per the doctrine of detractors seeking the abandoning of disinvestment plans, is fraught with danger. The airline, after becoming irrelevant with a minuscule market share, will gradually pass into oblivion. This basic reality of market circumstances pushing Air India in this direction needs to be understood by them now, not later.
10/09/18 Jitender Bhargava/Economic Times