Corporatise Air India to improve efficiencies, says IATA

NEW DELHI: The government should look at corporatising Air India to improve efficiencies before privatising it on the lines of the British Airways’ privatisation-first model, said International Air Transport Association ( IATA) chief economist Brian Pearce.

“The lesson from the UK privatisation has been the efficiency gain that came before the government privatised. In the UK, the government stepped away from the company and corporatised the management. This led to the company getting freedom to run its operations, but it also brought funding constraints, which led to enormous efficiency gains and the government sold it later. So, it is not the privatisation that brought efficiency, rather government stepping away from the company that brought efficiencies. Now, whether that can happen in India is something that I do not know,” Pearce told ET.

He said that In case of Air India, however, there’s a debt issue.

“I guess there are lessons from Japan Airlines in Japan and Chapter XI provision in the US. In these cases, the debt, not backed by any asset, (working capital debt) was absorbed by the government and then sold,” he explained.

The government has announced its decision to privatise Air India and has formed a committee, headed by finance minister Arun Jaitley, to decide on the privatisation model. Concerned over a huge debt of Rs 50,000 crore, the committee is looking at ways to address the debt.