Royalty is a charming anachronism in democracy that reminds us of India’s halcyon days of glamour and prestige. Until privatisation democratised air travel, Air India was India’s “Palace in the Skies” ruled by the unforgettable maharaja meme designed by advertising legend Bobby Kooka. Now, the extravagantly mustachioed mascot, smiling from under his red turban, has been floored by red tape laid by the new maharajas who strut along the corridors of power in collusion with the messiahs of markets.
At 87, the national carrier, which began life as Tata Airlines in 1932, is a gimp faltering on the runway of bureaucracy. Citing its fading cachet and crippled inadequacies, the airline’s detractors are out to sell it to the highest bidder who can offer the minimum price for its global brand value and expertise. Though Air India has many drawbacks like stale food, indifferent crew members and delays it is still the favourite airline of most Indians who see it as their own. Despite its tawdry reputation, occupancy is over 80 per cent.
For the past two decades, AI’s defamers have made numerous attempts to cripple it further or force the government to sell it off at throwaway prices. It can be argued that in the age of private enterprise, it is none of the government’s business to run an airline or a hotel. But equally strong is the rebuttal that decries disowning a commercial entity which once not only made money but was also India’s pride. Last week, the ball for its complete privatisation was set rolling by the finance minister during her Budget speech.
She said: “In view of the current macroeconomic parameters, the government would not only re-initiate the process of strategic disinvestment of Air India, but would also offer more central enterprises for strategic participation by the private sector.” Her intent was clearly reflected in the measly outlay for Air India out of the total allocation of `4,500 crore for the Civil Aviation Ministry. Last year, the air service received `3,975 crore from the government as equity infusion. Sitharaman is clear that the Centre is determined to hawk the maharaja. The reasons are purely financial.
Air India had accumulated a total debt of over `54,000 crore. Its losses during the last financial year are expected to cross `7,000 crore. It has failed to recover even after government bailouts amounting to `30,000 crore since 2012. Air India being a fully government owned entity, its losses are reflected in the Union Budget. In order to facilitate its sale, the powers-that-be will transfer around `30,000 crore in debt to a newly created holding company.
Yet with such additional incentives, a buyer cannot be found. The government is open to giving 100 per cent equity to the right bidder. With over 18 per cent of the market share and annual revenue of `26,000 crore, the lack of interest in buying the airline is baffling. One reason could be to beat the government down to offer it almost at peanuts. The government has almost written off more than half its debt and the balance is well secured.
But there is a flip side to the privatisation process. Why should an airline which owns every fourth commercial aircraft that flies in India, carries every sixth passenger and earns over `71 crore a day be handed over to a private entity? It may be losing money but how much dosh would a new company need to create a brand like Air India with a captive market and attractive fixed assets countrywide? The airline has some of the most experienced engineering facilities; private airline SpiceJet had to call Air India technical staff to pull out its plane which was once stuck in the mud.
The argument of losses being the reason for the carrier’s sale sounds specious in the wake of many airlines and corporate entities flying away with unpaid bank loans and committing financial fraud over the past few years. Privatisation advocates shouting from the rooftops forget that Indian banks are on the verge of losing over `11 lakh crore which corporates like Bhushan Steel, Jaypee Enterprises, Videocon, etc., have failed to return. The much-glamourised IL&FS was liberally funded to the tune of over `1 lakh crore by banks whose directors are now behind bars. More are likely to be arrested. But the privatisation brigade hasn’t demanded the brake to be put on the disbursement of public money to such IAS-backed financial companies.
According to published reports, the share of NPAs of giant borrowers has risen to 40 per cent of the total amount of loans. Stressed assets of big companies account for over 70 per cent of bad assets. The Centre found it appropriate to allocate over `2.10 lakh crore for the recapitalisation of public sector banks which were guilty of the same non or suspect performance as Air India. On the contrary, the national carrier has been pulled up by various government agencies like the CAG, CBI, Parliament and other calumniators.
Its every move is subject to approval from government officials. Even the general manager of a mid-cap private company enjoys more freedom than its Chairman and Managing Director. It makes more sense now than ever to retain Air India in government hands. Since half its debt has been written off, ensure accountability and operational freedom from now on. Moreover, the aviation market is growing speedily—with new airports coming up, more and more aspirational Indians prefer a boarding pass to other modes of transport.
Indians make up the third largest number of air travellers in the world. Air India, with 55 fully owned aircraft, is today in a much better position to leverage its assets by selling them off and taking back leased aircraft. It owns a huge land bank and buildings all over India and abroad which is worth a huge amount. Above all, it is difficult to calculate the real money value of the routes it owns all over the world, half of which lies unutilised by Air India.
It is this unmonetised market that Air India’s rivals are eyeing to grab. The airline may be an expensive trophy for the government to keep. But when myriad other trophies like faulty banks and decrepit PSUs are bleeding more, it makes better commercial and nationalist sense to keep Air India, whose roaring engines thunder on the runway as a symbol of India’s glorious heritage at lesser cost.