Economic Highlights

New Delhi, 17 January 2013

                                                             Air India A Flying Mess, Yet…

                                                    BABUS THRIVE AMIDST RISING LOSSES

                                                                     By Shivaji Sarkar        

It is a never dying story. Air India (AI) epitomises the adage, the Government should not be running a business. Undeniably, the more AI flies, the more it loses with losses increase every hour. But unfortunately, those who were responsible for the disaster and should have been penalised instead have been rewarded.

Today, accumulated losses have crossed Rs 33,000 crore during the 2007-13 financial years. And the 2013-14 losses will add by another Rs 3900 crore. Worse, the airline has a debt burden of Rs 43,000 crore even as total losses could possibly be under-estimated totalling around Rs 1 lakh crore.

Pertinently, the Supreme Court issued notice to the Central Government and Air India on a petition seeking probe into the “unnecessary” purchase of 111 aircraft costing Rs 67,000 crore in September 2012.

However, it is intriguing how a profit-making Indian Airlines, leader in the domestic market till 2001, made losses. That too, in a planned manner led by three bureaucrats, V Thulsidas, Raghu Menon and Arvind Jadhav. Shockingly, the trio were made AI’s Chairman and Managing Director despite the fact neither of them had any knowledge or experience of running a business. The CAG and Parliamentary Standing Committee on Public Undertakings raised questions on this, but for reasons best known these were ignored by the Government.

In fact, the Centre for Public Interest Litigation had also sought a probe into taking on lease aircrafts which again dented the exchequer by thousands of crores of rupees. It also demanded an investigation why the national carrier left profitable routes.

Notably, successive Civil Aviation Ministers have just towed bureaucratic plans for more perquisites to its officers. In reality, this is a camouflage to extend benefit to bureaucrats and their families. Perhaps, it would be the only airline in the world which extends freebies to not only to its employee’s wife and children but also to their parents, brothers, sisters, son-in-law and daughter-law!

Almost all Chairmen and Managing Directors, including the present CMD Rohit Nandan, avail these perks and free hospitality, despite rules not allowing these. So, if you are a bureaucrat, your entire family can fly at the taxpayers’ cost.

If this bad news, worse, the mounting losses are to be made over by infusion of Government funds to the tune of Rs 30,000 crore as equity, equal to the budgetary allocation for Mahatma Gandhi National Rural Employment Guarantee Act. Translated this reads means the airline is sunk forever.

In reality, more the losses it has the more it enjoys Government patronage as it has become almost a cash cow for bureaucrats. They mis-guide the Government on so-called security needs to keep the airline flying.

Indeed, there are numerous instances where national carriers, including Sri Lanka airlines, have been leased out to foreign airlines. But if this happens no one would be able to sell fine operating aircrafts at throwaway price. Air India (AI) has recently decided to sell its five Boeing 777-200 long-range planes to Etihad Airways, which has lately started joint operations with Air India’s arch-rival Jet Airways.

Scandalously, the planes purchased just six years ago during Raghu Menon’s  term as CMD are being sold for a meagre Rs 2,135 crore, which works out to just Rs 427 crore per plane, a mere one-third of the Rs 1,400 crore spent on purchasing each in 2008. Recall, this had raised eyebrows then and is seriously raising them again.

If truth be told, Menon was closely associated with the liberalisation of traffic rights to the Gulf, US, UK, China, France, Germany and Canada. This enabled international airlines to increase their market share at the cost of Air India. These agreements were criticised by Parliament's Committee on Public Undertakings and the Comptroller and Auditor General of India.

Besides, V Thulsidas as CMD was responsible for the “the merger of Air India with Indian Airlines.” This decision too was criticised by the CAG. Further, during his tenure brand new aircrafts, Boeing 777s and 737s worth billions of dollars were kept parked on the ground for months resulting in hundreds of crores of losses every month.

Topped by Arvind Jadhav who gave away prime routes like Kochi-Doha-Bahrain and Calicut-Doha-Bahrain which were running with 100 per cent load to competitors. He also withdrew flights from 32 profitable routes to benefit private airlines, ordered crockery worth Rs 12 crore and repainted aircrafts thrice. There are among many more decisions that Jadhav took which led to the airline having mounting losses.

Furthermore, the Central Information Commission (CIC) in response to an appeal by a Right to Information (RTI) activist SC Agarwal has asked the Government to disclose all details relating to Arvind Jadhav’s removal as CMD in August 2011which had been denied earlier as it was classified.

It seems Air India plans its losses for the benefit of those who are at its helm of the affairs. It is strange that those officials who take such Tughlaqi decisions are never penalized. Why cannot the Government act against them and recover losses? Why doesn’t it stop paying them pension and all other benefits?

Instead, Menon was rewarded with a post-retirement job as Principal Adviser (Archives) of Prasar Bharati at a salary of Rs 1.60 lakh a month, in addition to his pensionary benefits. Has anybody ever questioned what expertise or knowledge he has for such a skilled job that requires years of training and study?

In addition, the CAG has underscored that mega acquisitions of aircrafts, failing to synchronise lease periods of aircrafts with the delivery of new aircrafts and settling for only Boeing aircrafts instead of a mix or Airbus and Boeings and purchasing 68 aircrafts instead of the required 28 were some of the major reasons for the Maharaja’s mounting losses.

Clearly, Air India is a flying mess. During the last decade nothing has been done to take it out of the red. Rather during the last two years 37,000 additional seats to Abu Dhabi were doled out. Obviously this benefited rival Jet Airways.

In sum, the most sensible decision would be to close AI’s operation or at least lease the airline out to anyone who wants to run it. After all, this has no bearing on VVIPS security or pride of the nation. The best security would be to save the nation of corruption flying in the air. Let Indians get rid of Air India and save their souls.  ----- INFA

(Copyright, India News and Feature  Alliance)