Saturday, October 09, 2021

AI privatisation heralds end to taxpayer-fuelled ops; deleterious effect on industry fares, salaries

New Delhi: When full-service airline Jet Airways wound up operations in April 2019, it was a result of several triggers coming to boil — systemic factors like surging crude prices and an adverse foreign exchange rate; reasons relating to industry’s evolution like growth of low-cost flying, in addition to poor decision making by Jet Airways’ management and promoters. But an underlying factor was Air India.

For much of its lifetime, Jet Airways competed directly with Air India in the premium segment, and near-endless supply of taxpayer money at regular intervals for the state-run carrier meant Jet and other Indian airlines had to contend against an airline that constantly had its losses subsidised. This had a deleterious effect of fares and salary benchmarks in the industry. Air India’s privitisation marks a break from this trend.

From an upstart that spurred flyer growth in India to an ailing white elephant that dragged the entire sector along with itself to an extent, Air India has been through numerous phases. As the government gears up to hand over the airline to its founders, the Tata Group, the Indian aviation sector could witness a transformation in the quality of services offered, as well as its general health.

The turnaround plan for Air India approved by the Centre in 2012 envisaged infusion of Rs 30,231 crore in the airline till 2021 under an assumption that it would help the airline consistently improve its overall financial and operational performance. But despite the fund infusion, Air India continued to incur heavy losses. The exercise effectively became one to fund Air India’s losses, something that distorted the competitiveness in the airlines sector.

Since 2011-12, when the turnaround plan came into effect, the government has infused equity of Rs 30,520.22 crore in the airline till 2019-20. During FY21, there was no equity infusion by the government into Air India. However, during the year, the Centre provided guarantee support of Rs 964 crore to raise new working capital loans from the banks. Additionally, the government also extended a loan of Rs 4,500 crore to the airline from the National Small Savings Fund (NSSF). Between 2009-10, till the government has handed over the airline to the Tatas, it would have invested a grand total of more than Rs 1.10 lakh crore to support the loss-making airline.

“There is no denying that Air India is relying heavily on government support. To a large extent, it was the decisions of the government that brought on these huge losses and debts to the book. The second part is that Air India is expected to fly to certain places to meet the expectations and promises made by the government — not because the flight operations are going to be economically viable. It was deemed to be a social airline to do the government’s bidding, more than a commercial airline. One couldn’t compare it with an IndiGo or any other private airline,” Jitinder Bhargava, former Air India Executive Director, told The Indian Express.

09/10/21 Pranav Mukul/Indian Express

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