Air India should be privatized

India’s flagship state-run airline carrier, Air India, has long been wrestling with debilitating turbulence. But now, unless a move for privatization is made, it will surely make a crash-landing.
Air India seems keen on garnering a hefty bailout from the government. But with an already bloated fiscal deficit, that leeway just doesn’t exist.
The latest development: On Saturday, Air India’s chairman Arvind Jadhav asked employees to take a two-week hiatus on their salaries and pleaded with senior leadership to voluntarily forgo salary for July. This comes on the heels of a back-and-forth between airline workers’ unions, which are threatening to strike over the two-week pay freeze. It remains to be seen how popular working for free will be among senior management. Odds are it won’t be.
Air India has gotten the bad end of the stick in recent years. It battled an explosion of foreign carriers cutting into its market over the last five years. The government’s 2007 merger plan for the airline couldn’t have come at a more inopportune time: The costly endeavour came just as the debilitating 2008 oil shocks did. Finally, Air India began placing orders to upgrade its fleet around 2005 when times were good—now it is paying for the loose financial move.
The bigger problem, though, is that these short-term cash fixes won’t help Air India’s ailing books.
Restructuring and opening the airline to private cash certainly won’t be easy. Perhaps, even connectivity will be hindered. Jobs will be shed, salaries will be cut. But if Air India hopes to be solvent in the long term, it is going to need a serious capital infusion—and commitment to acting responsible—that only the private sector can provide.
21/06/09 Livemint

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Categories: NACIL Jun 2009