Air India Boeing 787-8 Dreamliner line number 35 test registered N1015 (later became VT-ANH) at the India Aviation show, Hyderabad March 2012. Photo copyright Devesh Agarwal.
Air India Boeing 787-8 Dreamliner line number 35 test registered N1015 (later became VT-ANH) at the India Aviation show, Hyderabad March 2012.

The incestuous relationship between Air India and the government

Air India is an enigma. It was the first airline in the world with an all jet fleet, ahead of the Americans and Europeans. From being the epitome of luxury, grace and hospitality, the palace in the skies, the airline is, today, a bottomless pit swallowing crores of tax-payer rupees. This despite having one of the most modern wide-body fleets in the world, and having the best airport in the world as its hub. Like its other mammoth loss making PSU (public sector under-taking) cousins, BSNL and MTNL, Air India is from the two “success story” sectors which India is expected to dominate in the decades to come; telecom and aviation. Irony knows no bounds.

Yet, inexplicably, despite the views of some of the most respected economists, and policy makers, the Indian government, refuses to exit Air India and continues to pump crores of taxpayer rupees. Why?

The answer lies in the incestuous relationship between the government and Air India. The former gets a multi-billion dollar play-toy, and latter gets kid-glove treatment, and both get absolutely no accountability to the tax-payers whose money is being burnt faster than the fuel in jet engines.

To better understand the situation, three recent articles deserve a reading.

The desperate need to jettison Air India

The first by Dr. Ajay Dua, an economics major from the London School of Economics, and a career bureaucrat who served as Secretary in the Ministry of Commerce and Industry, and in the Department of Industrial Policy & Promotion. In The Economic Times Dr. Dua outlines why “Getting rid of loss-making PSUs such as Air India would be good for the economy“. Observe the choice of words. No diplomacy from a person who would have practised diplomacy his entire career.

Failing performance? shift the goals

The next article by Sindhu Bhattacharya, contributing editor at CNBC-TV18, exemplifies the kid glove treatment the airline receives from the government.

After having received over Rs 25,000 crore of its Rs 30,000 crore bailout, the airline now wants relaxation of the performance targets it agreed to, in the turn-around plan (TAP) which was the basis for the bailout in the first place.

Why? you might ask.

Unbelievably the TAP makes the assumption that oil prices will remain at $45 a barrel, when it has been well over $100 for most of the last seven years during which the TAP was agreed to and under execution.

Now the airline wants the government to shift the goalposts and cover the losses incurred by missing the agreed-upon performance targets due to the amateurish assumption. One surely has to question the professionalism if not, the very competence of the airline’s staff.

Though mild, the article makes interesting reading on how the government forgives everything Air India.

Huge additional indirect subsidies for Air India

The article though does not highlight the innumerable additional indirect sops the government provides Air India. From guaranteeing its loans to ensure lower interest rates, to guaranteed business by mandating government travel including leave travel be performed on the airline, to extended payment terms with no penal interest to the government controlled fuel companies or the airports authority of India. All the additional costs being borne by the Indian tax-payer.

The government will never let go of Air India

At a time when airlines across the world are declaring record profits, and not withstanding all the benefits it receives, Air India is still expected to declare a monstrous loss this year. The Editor of The Business Standard A.K. Bhattacharya explains the incestuous relationship (he calls it ‘mutually beneficial’) between the government and Air India in his op-ed article, and why the government will never let go of its play-toy.

Social implications of Air India bailout

To most of us, Rs 30,000 crore is an intangible. As an exercise, I will try to put Rs 30,000 crore into something socially tangible.

Akshaya Patra India asks for a donation of just Rs 750 (Rs 950 in August 2017) to feed a child for one whole school year. The Rs 30,000 crore translates to feeding 40 crore (400 million) 316 million children one square meal a day for one whole year. [Added August 2017] The Rs 55,000+ crore debt of Air India will feed over 580 million children. With 195 million hungry people India houses over quarter of the world’s hungry. The Air India bailout can feed all the hungry in India for two years!!! Can we not deliver the Prime Minister’s “Ache Din” (good days) promise to these hungry? Does India need a government run airline more than the hunger of its citizens?

Incidentally, India’s priorities with relation to hunger and wasteful expenditure are already being questioned in Forbes magazine. I agree with India’s need for defense, no one can substitute for the Indian armed forces, but a national carrier? When we already have five domestic airlines?

Share your thoughts via 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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