April 23, 2024

politics of law

Politics and Law


3 min read


The talks to privatize government owned Air India has begun again for the second time after 2001. Privatization of Air India and that of British Airways (BA) in 1987 would be too similar for those who follow aviation industry. Mr. Collin Marshall who was appointed as the head of BA in 1983 fired around 22000 staff and in the next 4 years overhauled the airliner. The focus of the airline was changed from staff pleasure to customer satisfaction. In 1987, after 4 years from appointment of Mr. Marshall the whole privatisation process was completed and in that year BA earned a profit of $ 280 million. British Airways was privatized under the regime of then late Britain’s Prime Minister Margaret Thatcher. In 2001 privatization of Air India failed as there was not enough political backing to the then NDA (Northern Democratic Alliance) government led by PM Atal Bihari Vajpayee.

The Problem

Air India has around Rs. 50000 Crore debt whereas the market share of the airline is 14%, just 14% market share airliner is taking a lot of money to run in skies and the said money is of the government and indirectly of the public. The airliner clocked a small profit of Rs. 16.29 crore in 2005-06 while Indian Airlines posted a profit of Rs. 49.29 crore. In 2007 both the companies were merged and ordered new planes costing the debt to reach over Rs. 50000 crores, and from there Air India never actually recovered. The problem was not only regarding the debt but the worker’s pay-hike and the strikes and politics regarding the same. It is estimated that to run the airline it costs around Rs. 500 crore monthly. All these issues let the airliner to go from Rs. 5000 crore debt to Rs. 50000 crore in just 10 years. But the real question is who will buy the MAHARAJA (a.k.a Air India) amid such huge amount of debt on the airlines?

The Hidden Jewels

Though the Airliner is in bad shape due to many wrong government decisions it has a few plus points when it comes to investing in it from the investor’s perspective.

– Air India has a massive Infrastructure of engineering and ground handling subsidiaries which will be beneficial to any potential acquirer aviation company.

– It is rich in assets when it comes to plane. It has 140 planes including 43 self-acquired airbus A320s and 15 Boeing 777s. These 777s can fly to US and Europe non-stop. It also has Boeing 787s Dreamliners.

– It has around 2000 pilots and many more engineers and cabin crew.

– It has its own training centres at Nagpur and Hyderabad. It has a 32-acre land holding in central Mumbai, Air India building at Marine drive and posh colony in Delhi. It also has properties in London, New York, Japan, Hong-Kong and Mauritius.

– The airline is also a prime member of Star Alliance which is a large group of airline consortium.

– Moreover, Air India has prime slots for many international and national flights. It flies to 70 locations in India and 40 International locations.

– It also has many of the busiest aviation routes in the airline industry which can be very attractive for any acquirer.

– Air India has around 30 hangers in India where it can park and overhaul its planes. No other airliner has such amounts of hangers on its name.

All the above points cannot be ignored as seen Air India is rich in assets both human and physical.

The Conclusion

There will be hard times first for the airliner, in terms of under-cutting of wages or retrenchment of employees or in-terms of cancelling of non-profitable air routes. Afterwards the airline will be expected to evolve from the dark clouds. The said case of Air India is one more example of how business is mismanaged for some political dividends and how public-sector managers have a little freedom for administration. It’s not that private sectors have always flourished but take tough decisions is the job of high level management which they cannot do because of political intervention. The UPA (United Progressive Alliance) led the airliner to debt trap, the present government should not sell the airliner cheap which will lead to further guessing of was it a planned murder?

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