Selling any loss making PSU is the right way ahead; Bidders must be provided incentives
As the saying goes in United States of America, “The fasted way to become a millionaire is, to start as a billionaire and launch an airline as its owner”!
Jokes apart, commercial aviation is truly a venture, where one has to pump in huge funds for years and years before one gets the returns or any profit from it. Dozens of business leaders across the world have tried out launching aviation business and have failed.
In Europe in the early 1980s Sir Freddie Laker was a businessmen from UK, who for the first time floated a low cost airline named Laker Airways, he was running air cargo services since 1966, but his venture which offered flying passengers at under $400 from London to New York could not sustain itself. In United States several airlines like East-West, the mighty Pan-Am and Branniff international airways went out of business in recent decades.
In India we have had Modi-Luft, Sahara Airways and in recent years Kingfisher and Jet Airways folding up because of financial losses. Airline is a business which is capital intensive as well as labour intensive, requires massive capex on infrastructure and is very sensitive to changes in the overall economy. The airline companies in other words are very fragile and have to survive big ups and downs as they strive to make profits.
In such conditions, on Monday 27 th January, came the news of the Indian government wanting to sell off India’s National carrier Air India to the highest bidder! Air India has been India’s pride. Its survival has been related to nationalistic spirit and some politicians have even threatened the government saying they will sue the government over this decision to sell this PSU. But what’s happening is inevitable. Air India has been a victim of endless political interference, public sector culture of apathy and lack of anybody taking ownership of the organisation and driving it with professionalism. Air India has a debt of close to Rs.60,000 crore. And the government has decided that bidders should absorb around Rs.23,400 crore of that debt. Its going to be tough for the bidders to accept this demand.
Once the largest player in the Indian aviation market with a complete monopoly, Air India has been consistently losing its market share. In December Air India’s market share came down to 15.65% while largest share was taken in the Indian skies by Indigo with 61.21% under their wings and Spice Jet was at 20.80%. This has happened only in the past ten to twelve years. If the trends continue, it is obvious that Go Air (market share 13.78%) and Air Asia may also overtake Air India!
It’s just not the Government’s job to be in this commercial aviation space and compete with private companies. Government should not be running an airline. The government should only ensure that airlines are providing cost effective and fair services to all parts of the country and all sets of population.
Now that Air India has reached this stage, the government must in the near future, encourage the bidders by giving them all the support and incentives to revive Air India and save the jobs and assets such as aircraft and other equipment of this once glorious air carrier.