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This week the second-longest strike in the history of Air India – no stranger to industrial action – came to an end but the airline remains a drag on the entire Indian aviation industry.
The Maharajah, as Air India is known, is saddled with an estimated $10bn in gross debt. It is racking up $1.5bn in annual losses and the cash-strapped government can ill-afford to add to the countless bailouts it has already given the airline.
Air India’s troubles have wreaked havoc on the once-flourishing Indian aviation sector. Other airlines complain that Air India’s subsidies enable it to keep prices down and pushes them into losses.
Yet, given annual passenger growth over the past two years of about 20 per cent, India could be a prime target for foreign investment, should the government create a level playing field and follow through on its promise to allow foreign airlines to take shareholdings in domestic carriers.
So far the government seems at a loss what to do. When asked on national television in mid-May about the prospect of privatising Air India, Ajit Singh, India’s civil aviation minister, suggested that perhaps the days of national carriers were past and it was time for India to move on.
“First, we have to put Air India on the right track, make it viable,” Mr Singh told CNN-IBN. ‘If you look around, the days of national carriers have gone.”
However, Mr Singh was later forced to retract his comments on privatisation after an uproar in parliament, while the pilots’ strike demonstrates how difficult it will be to make Air India viable.
The latest strike stemmed from simmering tension between the international arm of Air India and its mostly domestic counterpart, since a merger in 2007. International pilots, fearing loss of seniority, objected to their domestic counterparts being trained to fly the 27 Boeing Dreamliner 787s which Air India ordered in January 2006.
The Maharajah has fallen on hard times in recent years but for much of its 80-year history, Air India, India’s national carrier, was renowned as the height of service and luxury, writes Neil Munshi.
The then Tata Airlines was launched by industrialist and father of Indian civil aviation JRD Tata and British-South African aviator Neville Vintcent in 1932. Mr Tata himself flew the maiden voyage – a single-engined Puss Moth loaded with mail – from Karachi to Bombay.
In 1948, after independence, the government acquired a 49 per cent stake in the company – renamed Air India – with the option to purchase an additional 2 per cent, which it exercised in 1953 when it nationalised the carrier.
Still the glory days continued. Indians, given the choice between Pan Am, TWA, BOAC or Air India, chose Air India – still known for its excellent service and glamorous staff.
Things began changing around 1978, when Mr Tata was unceremoniously ousted as chairman of the company. “Sir, nothing is being done except through the ministry – for God’s sake come back,” he recalled his former staff telling him.
Rajiv Kumar, the head of the Federation of Indian Chambers of Commerce and Industry, says the bureaucrats who run Air India are ill-equipped for the task, and the problem is compounded by a government that has always been willing to bail out the airline – to the tune of Rs300bn ($5.3bn) in April following a Rs180bn ($3.2bn) debt restructuring package last November.
In a recent op-ed in India Today magazine, he wrote: “Any attempt to find a ‘solution’ or fix the problem within the present framework is bound to fail . . . There is simply no alternative to privatising Air India.”
Sanat Kaul, chairman of the Indian chapter of the International Foundation for Aviation, Aerospace & Development, concurs that India’s public sector is particularly ill-suited to run an airline given “the scrutiny of parliament, [political interference], and public sector employee unions”.
Analysts say the government has mismanaged the airline for years, most pointedly with the $15bn order in 2005 of 111 aircraft from Boeing and Airbus which is largely blamed for the build-up of debt.
In addition, they say the merger of the long-at-odds domestic and international wings of the airline was both ill-conceived and poorly executed, with both companies profitable up to that point.
The government’s inability to reconcile the two factions came under the spotlight in May last year, when domestic pilots went on strike demanding the end of an uneven pay structure under which domestic employees are paid substantially less than their international counterparts.
When that strike was resolved, Air India, in an effort to regain market share cut prices. Rivals were forced to follow suit, pushing the industry into a spiral from which it has yet to recover and racking up an estimated $20bn gross debt burden.
Meanwhile, Air India continues to fly some of its former domestic pilots to Singapore to train on a Dreamliner simulator.
The carrier has one of its own – a Rs2bn machine lying dormant at the Mumbai airport because management has not yet recruited an instructor to man it. The tab for it and the cost of training the pilots abroad will be paid by the taxpayer until the government decides that, as the aviation minister has said, “the days of national carriers are gone”.