NEW DELHI: The merger of Air India and Indian Airlines, coupled with the unviable decision to purchase 111 new aircraft, contributed to the downfall of Air India, says Minister of Civil Aviation Jyotiraditya Scindia.
"The merger of the two national carriers, along with purchase of new aircraft and the liberalisation of bilateral rights are the reasons for the downfall of Air India," Scindia said in the Lok Sabha on Wednesday.
The minister recounted how India’s flagship carrier turned from being a profitable airline into a loss making entity.
"Before 2005, Air India was making a profit of Rs 15 crore per annum and Indian Airlines was making profit of Rs 50 crore. These airlines were made to purchase 111 aircraft at a cost of around Rs 55,000 crore which pushed the national carrier into deep debts," Scindia pointed out.
Liberalisation of bilateral rights, at a time when Indian air carriers did not have the capacity to fulfill it, resulted in the airline incurring a daily loss of Rs 20 crore.
"The accumulated losses of 14 years touched Rs 85,000 crore. The equity infusion had cost the government Rs 54,000 crore, grants to the airline totalling Rs 50,000 crore and net debt of Rs 66,000 crore had left Air India staring at a chasm
of Rs 2.5 lakh crore," Scindia added.
All these reasons made it unviable to fly the airline, which is when the government, led by Prime Minister Narendra Modi, took a decision to disinvest it. The money that was being infused to keep the airline afloat by the government was brought to constructive use by diverting it into state sponsored welfare schemes like Ujjwala and Jal Jeevan Mission.
In order to protect employees of the airline, a shareholder agreement with Tata mentioned that there would be no layoffs during the first year. After the first year, employees would be offered voluntary retirement schemes along with continuation of medical benefits.