Sunday, 11 June 2017

Air India: Inoperable & Unsaleable

Editorial INDIA TODAY dt June 19, 2017
  • Air India, flagship national carrier, is to day inoperable and unsaleable.
  • Air India has been piling up losses ever since the two erstwhile airlines – Air India and Indian Airlines – were merged in 2007 to form the present entity.
  • Accumulated debt of Rs.52,000 crores & annual interest payout of Rs.5,000 crores is unserviceable. The airline has to repay Rs 19,000 crore by 2020-21.
  • Air India’s combined OTP (on-time performance) at four metro airports is worst at 67.7% which means every third flight was delayed.
  • Air India’s load factor was the lowest again among all national airlines at 81.4%.
  • Air India’s share of the domestic market fell from 16% in Jan 2016 to 12.9% in Nov 2016. In January 2017, it improved market share to 14.1%.
  • The airline is being kept alive by taxpayers’ money since the government is committed to pumping in about Rs 30,000 crore over a decade to prop up the airline’s equity. About 80 percent of this money has already been poured into the airline. The turnaround plan under Air India has been given such a massive equity support projects an operating profit of Rs 1,086 crore in 2016-17 on revenue of Rs 22,206 crore and a net loss of Rs 1,989 crore.
  • Lenders mostly PSU banks & FI's are unwilling to take a 'haircut'. They are unwilling to convert debt into equity as well.
  • Annual losses of Rs.3,000 unbearable.
  • Govt of India is clueless how to handle this 'white elephant'.
  • Air India management have no clue how to go about resurrecting it.
  • Most undisciplined organisation today.
  • According to public enterprises survey of 2014-15, just three PSUs accounted for over two-thirds (~62.9%) of the total losses incurred by the CPSE's in that year. They are BSNL, Air India and MTNL. 

My View:
Since divestment or privatization is out of question (no sane fellow will invest or buy Air India), Govt has only option i.e. shut down, dismantle, auction all its assets and repay all debtors from its coffers. That is the price Central Government has to pay for  signing as guarantor for Air India's debt. That would be the cheapest proposition. Govt has pumped in over Rs.24,000 crores during past decade as equity and it simply vanished. Any other option would cost nation, much more. Government should strictly implement BIFR norms of rehabilitating public sector units as soon as equity erosion exceeds 50%. Otherwise many more Air India's will surface year after year and costs nation dearly. Simultaneously, Govt should stop poking its nose into PSU's day-to-day management including Banks. Since PSU's are sinking one after other Govt should come out with a policy frame work to divest or sell all PSU's one after the other, ahead of their collapsing and confine itself to governance. BSNL Mobile was ready for launching in 2001 and the then Telecom Minister Pramod Mahajan intentionally delayed by over an year to favor Reliance Infocomm's launch in 2002, for which he was ousted by PM Vajapayee. BSNL has been reeling under six consecutive years of losses of over Rs.40,100 crore of accumulated losses. It has been crushed by private sector telecom rivals. The future is, there seemed no future. Unless PSUs are operated professionally free from political interference each one will find its way like Air India and BSNL.

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