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Time Is Running Out For AI: Bhargava

Jitender Bhargava, former ED, AI talks to Sanjay Thapa Jeet in the ups and downs and the intricacies involved in the disinvestment process of the national flag carrier. He talks about the various controversies and issues involved in turning around the white elephant

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Is AI sell off a good idea for the govt which is in an election mode and has just 11 months?

Disinvestment of Air India is the only logical course for Air India’s survival/revival considering that under government ownership its performance, finances have suffered enormously. Can the government’s attitude, the manner of appointment of Board members, Chairmen, work practices be changed in the existing system? If not, must Air India continue to suffer without remedial action being taken? Political considerations aside, there is little prospect of any change materialising for the good of Air India if the ownership is not changed.

Now that the disinvestment has failed the second time, what is the way forward?

The government will have to rethink its strategy. It will have to realise that disinvestment is critical for Air India’s survival. Time is fast running out as Air India’s market share has been going down steadily year after year with no hope for going up as private airlines have over 900 aircraft on order. Once these aircraft are inducted, the share of the capacity of private airlines will go up further and therefore market share at the expense of Air India. While Air India has huge assets, it also has huge liabilities in terms of debt which it can’t service without government’s financial assistance on a sustained basis. As the current round of disinvestment process elicited no response, private airlines do not appear to be enthusiastic about acquiring Air India. A detailed analysis of the failure can only show which of the conditions led to lack of interest and no bids being received. Accordingly, there may be a need for modifying some of the disinvestment conditions.

Is it at all crucial to sell-off AI, being a national carrier. Even BA and Lufthansa were turned around.. shouldn't it be retained as such may be through tweaking efficiency?

My understanding is that the process could have also possibly failed because the government did not effectively put the strengths of Air India in public domain, in the Expression of Interest document. A negative perception of Air India being a liability wasn’t therefore effectively corrected. In the last 25 years various remedial measures have been attempted, including getting private sector stalwarts on the board of Air India, to help the airline but with no satisfactory results. In a government set up, there are inherent systemic weaknesses affecting efficiencies and productivity. In an intensely competitive market, Air India’s performance is bound to suffer unless the systemic weaknesses can be eliminated, which we know from experience can’t be undone.

Maybe it could face a Marshall plan like in BA, or re-packaged say like monetising its idle assets and debts including lesser govt interference.

Ensuring lesser government interference in Air India’s functioning can only be a pipe dream in our current political environment. A large chunk of Air India’s assets has already been either sold or mortgaged against loans taken. At the end of the day, it is a question of efficient functioning which isn’t possible as performance in recent years has shown.

The option of going public through an IPO, will it work?

IPO isn’t simply possible because Air India has to be profitable for three years before it can be thought of. With the quantum of debt on its balance sheet, profitability is a far cry unless govt. writes it off in one stroke. However, the government must ensure that extraneous factors which have accentuated its debt must be investigated and the guilty punished.

Like railways it a vital connectivity infra -- to remote corners of the country and as such a subsidy is valid. 

While Air India has undoubtedly contributed enormously in the past, its role has declined due emergence of strong and profitable private sector airlines in India. Even they are operating to hinterlands providing connectivity as the recent UDAN experiment has shown.

To be fair to Air India employees, the government should pursue the disinvestment process for Air India’s survival but at the same time ensure that interests of its employees are adequately safeguarded because much of Air India current state is the result of reckless decisions taken by the ministers and bureaucrats.

To expect the government to subsidise Air India in perpetuity wouldn’t be a practical proposition because scarce resources need to be deployed in the field of education and health, as the government has already clarified.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Sanjay Thapa Jeet

The author is an independent journalist

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