ECONOMIC HIGHLIGHTS
NEW DELHI, 8 September 2005
Aviation Sector Problems
MERGE THE TWO NATIONAL AIRLINES
By Dr Vinod Mehta
Our two nationalized airlines have been in news for a
long time, mostly for the wrong reasons. Air India, which was once a pride of
the country, is today the last choice of the international traveler. Indian
Airlines, which till a few years ago enjoyed virtual monopoly is today facing
serious competition from the domestic private airlines.
Relatively speaking, the two public sector airlines
are not economically in sound shape and their financial performance varies from
year to year. Many a time in the past the Government had infused funds to shore
up the capital base of both the airlines.
Had they been a private airline they would have gone bust a long time
back, as they did not change with the time.
When these airlines were set up more than four
decades ago, the competition at the national as well as international level was
almost non-existent. It was easier for
Government monopolies like Air India
and Indian Airlines to operate as good, efficient and profitable airlines. However, with the scientific advances in the
aviation industry and the entrance of many commercial airlines in the aviation
industry the competition has intensified.
Many airlines around the world have been able to
survive the competition, while others have closed down because of their
inability to face the competition. Not a few have merged to become mega
airlines. Air India
and Indian Airlines have survived only because of the government backing.
Besides, it would be too much to expect from a
Government to divert its scarce resources to the airlines when there are urgent
and competing demands for development and other projects. We are already
committed to invest heavily in rural areas as well as on national
highways. It may be noted that being
wholly owned by the Government both Air India and Indian Airlines were
functioning more as government departments rather than commercial organizations.
With the result that appropriate decisions regarding the replacement of old
aircrafts, expansion of air fleets etc. could not be taken at the appropriate
time. Thus, our two Government-owned
airlines are saddled with old aircrafts and have degenerated into third class
airlines.
Since the competition is intense, most of the
airlines in the world have gone for restructuring and partial
disinvestment. For instance, Thai
International Airways, which compares to Air India, was an unknown identity 25
years ago. Today it is one of the best and well-managed international
airlines. When it was a wholly owned
Government enterprise, it was going into losses, and now as a limited company,
with some percentage of shares still owned by the Thai Government, Thai
International Airways is a profitable company.
So is the case with other international air carriers like Singapore
Airlines, KLM of Holland, United Airlines and so on.
In India,
though the Disinvestment Commission had recommended disinvestments in the two
airlines, and the Government has also made up its mind to do so, yet it has not
been able to muster political courage to disinvest in these airlines. The
Kelkar Committee had also made certain recommendations for the restructuring of
the airlines. However, before we go for disinvestment and restructuring in the
airlines, one basic question needs to be answered.
What is the rationale of having two commercial
airlines with two separate managements, two separate engineering departments,
other support facilities and two separate staff cadres? Specially when commercial airlines the world
over are merging to save on costs. But Air India and Indian Airlines are not
even ready to have some kind of a working relationship with each other. Why?
Since most of the airlines the world over are constantly trying to cut
their operational costs through mergers and other ways, there is a big
rationale for merging Air India and Indian Airlines into one national airline to
cater to national and international air travel.
As a single entity they would be reaping the benefits of the economies
of scale.
The unions of both the airlines are going to oppose
this merger but the question to be asked is: Are the airlines being run as a
commercial proposition to provide services to travellers or are they being run
for the benefit of the employees as an employment generation programme. Obviously, the running of airlines cannot be
an employment generation programme, like the Jawahar Rozgar Yojana for the poor
workers. Since it is a commercial proposition, the Government has to be firm
with the unions and ask them to cooperate in the merger of the two airlines in
the best interests of the country.
Once the merger has been achieved the disinvestment
can be taken up seriously. In fact, the
disinvestment in the airlines should be more than 51 per cent so that it comes
out of the purview of the Government. It
should be managed by a professional body which should be empowered to take all
the decisions including the decision to purchase new aircrafts and arrange for
the financing of the new purchases. Only
in this way can the new merged airline be turned into a world-class airline
like Singapore Airlines or Thai Airways.
It must be underlined that in this highly competitive
airline business, the top class airlines of the world today replace their
aircrafts after every five to six years.
As a result, most of their aircrafts offer modern comforts to the travellers
which are not available in older aircrafts being operated by Air India and
Indian Airlines.
For instance, the new aircrafts have personal
television systems with each seat, information systems that constantly show the
speed of the aircraft, the height at which it is flying, the temperature
outside the aircraft, as well as maps of the route as it flies. None of the Air India and Indian Airlines
aircrafts has these facilities on board as most of them are two decades
old. With these kinds of glaring gaps,
very few people would like to fly our airlines.
It is amazing that for the last ten years, three
successive Governments had not been able to take a decision on the purchase of
new aircrafts to replace the old ones.
It is only recently that a decision has been taken to purchase new
aircrafts for Air India
and Indian Airlines.
In the cargo business too, the foreign airlines
operating in India
are doing roaring business, while our own airlines are not even in a position
to make money. This again is due to our
inability to find resources for the purchase of new cargo aircrafts and our failure
to take a decision in time.
Clearly, it is high time that we take a decision on
the merger of the two nationalized airlines. If a merger is not possible at
this stage, at least there can be a holding company. It is ridiculous that both
Air India and Indian Airlines fly to the same destinations like Dubai, Bangkok etc., and
compete with each other. This needs to be avoided.
Air India
should also take wise decisions to work out its route charter to its advantage.
For example, the flight on Delhi-Moscow sector has been discontinued by Air India; on the
other hand, Aeroflot, the Russian airline, is minting money on this sector.
This kind of ill planning should stop. ---- INFA
(Copyright India News and
Feature Alliance)
|
Archives 
