Delay and dilly-dally. Prevaricate. Allow the enterprise to drift. Air India is akin to a rudderless ship right now. Sooner than later, it will founder on the rocks and sink. Or maybe, get caught in a gale and capsize. With an astronomical amount of debt to its name, Air India, due to low productivity and an unprofessional management, is doling out cash every year to the tune of Rs 3,000–5,000 crore, going by past averages. And yet, the government remains indecisive on the fate of Air India.
To be honest, the government itself is in a tight situation. Suffering from a major setback to its disinvestment agenda, the government failed to sell any major stake in Air India. This failure has forced the government to get back to its drawing board to see what went wrong and address the impending structural issues. The government had planned to sell 76% stake in Air India, which includes 100% stake in low-fare international subsidiary Air India Express and 50% holding in ground handling company AISATS.
The two biggest reasons, according to analysts, which might have repelled investors from bidding are the total debt and liabilities of Rs 33,000 crore on the books of the airline and the government’s retention of a 24% stake in the entity. With the government’s inability to sell any stakes in Air India should force the government to introspect and start a comprehensive restructuring of the airline.
The inability of the government to sell stakes of Air India highlights the fact that government intervention in the aviation and hospitality industries are unnecessary. Huge over-staffing and lax management practices contribute to the inefficiency and incompetency of such public sector units, that has become synonymous with certain government enterprises over the years.
Margaret Thatcher, former Prime Minister of the United Kingdom, might be of help here. Or more precisely, her turn around initiatives. From facing an operating loss of £102 million in 1981–1982 to earning a profit of $1.7 billion (after taxes), British Airways has come a long way. When it was listed on the stock market in 1987, it was oversubscribed. The privatization resulted in £900 million being injected into the airline. Combining this huge amount of money with the slashing of over 22,000 jobs (a necessary evil) and getting rid of surplus aircraft and other assets contributed to the success of British Airways, allowing it to expand considerably and maintain its profitability.
The Government of India can take a cue from the example of British Airways. Exit. Do it without delay. Every day counts. Cut the losses and run when you are caught in a no-win situation. The government stands a chance to get an attractive price for Air India because of its untapped potential and the hidden assets. It’s true, that the decision on the Air India divestment was not an easy one, to begin with, especially in an election year.
Greater the delay in Air India’s divestment, the more good money would be put after bad. The British successfully resurrected British Airways by offering it to the public, which enabled it to raise enough equity to balance its debts. The government must sell Air India’s assets to the public, allowing itself to salvage some of its pride. After all, isn’t Air India a national asset?