Flying off Air India

I would not call myself a frequent air traveller but neither am I a newbie. Since the past four years, my travel history has seen a significant spike and I have been a regular customer of almost all travel booking portals. Office demands for travel to different cities and you got to come back to your home. Courtesy all these reasons, on an average of once every month in the last four years I’ve been on one plane or the other. However, it is surprising when I look back and realize that in all these travels, I have utilized the services of our national carrier only once. An approximate of 1 in 50 times that I have been in air with Air India, all other times it has been bereft of my company. With a hit ratio as bad as this, no wonder the once beloved carrier is struggling for its survival.

The news of ailing state of affairs of Air India has been doing rounds since quite some time now. I was faintly aware of the talks of enormous debt it carries and how it is a huge burden on the government. However, much to my chagrin, the politicos hold a soft spot and bail it out unfailingly. However, the debate of divestments continues till date. To gain some perspective, I set to delve a little deeper and get to the roots of the matter for once.

At the present stage, the national carrier is in a debt of about Rs.50000 crore with a market share of approximately 14%. It is currently on a bailout package of Rs 30000 crore, spread over for a period of ten years, announced by the previous government under the leadership of Manmohan Singh in the year 2012. However, the airline is still struggling to prove its financial worth. For all the tax payers’ money being pumped into it periodically, it is hardly doing any justice to its proponents. It is interesting to take a note of the 14% market share acquired by it, however meagre but unavoidable. While the rest of market is conveniently captured by myriad of private players, Air India finds itself flying off to serve our bureaucrats. The government officials, those with long term contracts signed and those who are flying off to locations where private players may still not be dominant enough are the only souls keeping the airline off ground. Up and running, at a mercy.  But why does the common man not fly off the national carrier at routes it is prevalent? A closer look at the inside affairs will answer any doubts about Air India being infamous. At most routes, the private players dominate and offer great discounts and cash back schemes, pricing their tickets at competitive prices. This is where the trouble starts. Air India is not available at the preferred timing, the frequency is limited and to add insult to the injury, the flight is perennially delayed, is almost never on time. The in-flight services being offered are at the mercy of flight attendants, most of whom are uninterested, perpetually tired, not appealing and do not make any effort to present their best self.  The customer is often left disappointed and struggling right from the moment of booking the tickets, to making any changes, fighting off the rusted equipment and collecting baggage damage free. Thus, every passenger wonders, why should I choose to pay extra for such a pitiful service? It is saddening to see my hard earned money being flushed out for such a hopeless case.

The only viable solution is to privatise and divest it off. It is nothing but a euphemism for selling off because only that will bring out any value out of it. Not surprisingly, the current finance minister, Mr Arun Jaitely has also advocated divestment of the loss-making airlines at several occasions. He reasons that if the industry can function with 86% being held by private players, it can be fully handled by these players as well. It would be interesting to reason out the factors which motivate a government to nationalize a particular sector. Any government usually grants a monopoly to a single player to protect the interest of the market and when it is economically unfeasible for multiple players to exist in the market. For instance, the power production and distribution requires huge capital investment which needs a considerably long time to recover its true worth. Hence, Indian power sector is nationalized. The other case is in matters of public security, where it makes sense for government to take all control. In all other cases, to ensure market productivity and to prevent failure, the government maintains intervention using taxes, subsidy and regulations wherever necessary. A look at the aviation sector proves that the entry of private sector has improved the dynamics of the market. Airfares have significantly reduced. The fact that a salaried middle-class man can now afford to fly off to vacation with his family without burning a hole in his pocket is a testimony to the changes in the sector. Moreover, the services offered have increased and improved; competitiveness between the players is benefitting the travellers. Thus, it does not take an award winning economist to understand that thrusting money in the already sickly airlines does not make any sense.

It would be wise to look over across all the countries which have privatized their erstwhile national carriers and track their performance. The privatization of British airways took its sweet time and it’s now the most preferred airline in the United Kingdom. Canada, Singapore, Kenya are only some of the examples which can provide us a guiding light to reap maximum value out of our national carrier and relieve it of the slow death.  It is time to get rid of the legacy issues and put this money to a better use.

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