• PAGE ONE
• INDEX
• HOME

Air India -- Bailout instead of disinvestment?

Ashwini Phadnis

WITH the Air India (AI) disinvestment coming to a grinding halt, it is time for some serious introspection by the authorities and those at the helm of affairs at the airlines, especially as the lifeline the proposed disinvestment may have thrown up has n ow become a distant dream.

The Tatas, the last members to pick up a stake in the Maharaja, withdrew from the race late last week. The Tatas had earlier tied up with Singapore Airlines (SIA) to pick up a stake in AI. However, with SIA withdrawing on September 1, the Tatas found it difficult to find another partner for the AI bid.

A clear vision is now required if the Maharaja is to vie with the other greats in world aviation. With little or no funds at its disposal, an old and aging fleet, contracting worldwide connectivity, and a shrinking market share, the need for infusion of capital to revitalise the airlines has never been greater.

A cursory look at AI will show that what is plaguing the airline is neither unique nor difficult to sort out. What is required is sheer determination to work towards creating a world-class airlines.

One of the possibilities the Government could consider is providing a bail-out package to AI. After all, it can be argued that in the post-disinvestment period the new investor would have pumped funds into the airlines. But now with that option shut for the moment, it is, probably, not unfair for the Government to step in and help.

This is not unheard of in the sector with several developed countries pumping in public funds to keep their national carriers afloat.

Earlier, the French Government had pumped in $4,000 million, the Greek government, $1,800 million into Olympic airways even as the Portuguese Government gave a lifeline of around $1,100 million to TAP airlines.

Besides, post-September 11, the US government led the way by providing a multi-billion dollar bail-out package to its aviation industry.

Back home, the Government has already indicated its willingness to provide funds for Indian Airlines (IA) to acquire new aircraft. If the Government can be generous to one of its creation why should it have a different approach for the other State-owned airlines?

If a bail-out package is provided, implementing it may not be a problem. AI already has already prepared a plan that was circulated among the bidders on how much funds would be required in the next 10 years so that the airline can acquire more aircraft, operate on more routes and regain some of its lost glory.

Another issue that will help not only AI but the industry as a whole, is a clear mandate on what the role of the two State-owned airlines is. At present, there are several stations in the far east to which both IA and AI operate flights, thereby eating i nto each others market share.

Greater synergy between the two airlines will also help the cause of aviation. This is already being done at some stations abroad. Take for instance the operation of flights between India and Malaysia. In an effort to ensure greater loads for both AI and IA the staff decided to work together and give Malaysian Airlines tough competition.

If the bail out package is provided AI apart from getting new aircraft, AI will also have to look at product upgrade if it wants to be a real contender in the international market. Take just one example. While AI offers personal television sets to its Bu siness and first class passengers, televisions in the back of front headrest is a common feature in the economy class seats of several airlines including Singapore Airlines.

AI is already considering a voluntary retirement scheme (VRS) so that the airlines can downsize its voluminous workforce. However, to be fair to AI the bloated work force was not entirely of its own making. The airlines like many other public sector unde rtakings was left with little choice but to implement a judgement of the highest court which asked that all jobs be done in house. Besides, the airlines has been provided little or no financial autonomy as AI top brass have to seek Government permission for any purchase over Rs 50 crore.

What is needed is speed. If the authorities act fast they can take advantage of the slump in the global aviation market to acquire aircraft at rock bottom prices.

The arrival of more aircraft will offer AI the opportunity of mounting additional services to more destinations. This will help the airline not only overcome its present difficulties but also become a truly global player.