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 a monopoly 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.
All Hot Air
The government, too, while being determined in its pursuit to take the disinvestment process to its logical end, has blundered. Instead of laying emphasis on Air India’s huge debt and mounting losses, GoI would have done well to have made critics aware of the threat of extinction that looms large for the airline. Statistical data on the decline in market share over the last five years, and the way it would unfold in the next five years, should be enough to prove to the naysayers that change in ownership is critical for Air India’s survival, revival and transformation into a robust airline.
In lieu of quick disinvestment, suggestions on providing professional leadership under government ownership as it existed in the 1960s and 1970s when Air India was acknowledged as a great airline is nothing short of hoodwinking oneself.
There is no one, as of now, of Air India founder J R D Tata’s sense of commitment to head the airline, nor the political climate where politicians know where to draw the line.
It is, therefore, imperative that government, post-haste, initiates a dialogue with people, who can potentially prove to be stumbling blocks, to apprise them of why disinvestment is essential for Air India’s survival.
Government, in the process, may have to backtrack on its own claims of improved performance, because it can’t delude people with knowledge of the aviation sector by claiming improvement in performance and yet maintaining that disinvestment is the only way forward for its survival and revival.
If Air India has shown an increase of 3-5% in revenues, or number of passengers carried as compared to what it did the previous year, the reason is really not ‘improved performance’ but 20%-plus growth rate being recorded by the industry being a key contributing factor. Likewise, operational profit or reduction in losses is largely on account of lower aviation turbine fuel (ATF) prices.
If private airlines are showing improvement of 10-15% on financial performance, a mere 3-5% by Air India shouldn’t be deemed as ‘signs of recovery’. This is not to take away any credit from employees who are currently working under tremendous uncertainty, but to place performance in proper perspective.
Gone With the Wind?
The systemic weaknesses that have pulled Air India down over the years can’t be camouflaged with claims that wouldn’t stand scrutiny. A reality check is, therefore, essential for both the government — which is propelling the disinvestment move — and for detractors, to know that for Air India’s survival, disinvestment is the only option now.
A few years from now, even this option, with its constantly reducing market share, will cease to exist. It’s really wake-up time to infuse life into a brand that we all cherish and that no one would like to see wither away.
The writer is former executive director, Air India. By Jitender Bhargava
Source: Economic Times