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A PPP proposal to rescue Air India while retaining government ownership

Yesterday the government announced a massive Rs. 30,000 Crore ($5 billion) bailout of national carrier Air India.

The government has justified this this bailout to ostensibly protect the jobs of the over-bloated workforce of 30,000 employees at the airline.

Simple maths effectively translates the infusion to Rs. 10 million per employee, a figure the average Indian cannot even hope to earn in their lifetime.

All four aircraft types operated by Air India.

A good way to understand why the government is doing what it is with Air India, is to read this article by TN Ninan titled “Do-gooder economics and the LokPal“, which shows how the powers that are, distort the market to create un-level playing fields for the personal enrichment of a feeding train all the way from the very top of the political food-chain to the lowest.

The bailout of Air India is not for its employees. They are just the pawns on whose shoulders the justification gun is fired from. The real beneficiaries are elsewhere.

Corruption, not necessarily financial, rears its ugly head in all aspects of the airline’s operations.

Management is beholden to the political class for their jobs, so the leadership merely accepts the status-quo with minor window dressing to protect their chairs and by extension, their careers, for their tenure at the airline. Any effort by the management to change the working is met with political interference or labour resistance, the latter, being supported by the politicians who want to protect their vote-banks. The middle and junior management and the rest of the work force mimic this attitude raising lethargy and tolerance to inefficiency to unacceptable levels.

The only way to remove this governmental operation and political interference is to remove government from the operations of the ailing carrier, which means privatisation, and herein lies the billion dollar hurdle. There is no way any government, let alone the current, weakened, UPA-2 government, can politically sell even the notion of the privatisation of Air India.

To get around this, we propose to the Government of India, that they should consider leasing out Air India to a private player under the PPP (Public Private Partnership) model, as it has done for airports at New Delhi and Mumbai.

Under a competitive and open bidding, the airline can be leased out for a period of 15 or 20 years to a bidder leading a consortium which includes an airline of any origin, subject to a maximum of 49% share, in return for a share of revenue, or a share of profits.

The government should reserve an option of the employees of Air India coming together and bidding for the company which would bring the trade unionists at bay.

The government will have a 26% shareholding in the new company, along with representation on the Board of Directors. The government will not have any role to play in the daily operations of the company. In return the government should spell out in its tender document a time-table of financial goals the lessee must achieve, with the needed penalty clauses put in place.

What are your thoughts on this proposal? Share a comment.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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