Is the government running out of tricks to keep Air India flying?

Earlier this month, news about growing concerns over the salaries of employees of two Indian airline companies hit the headlines. Jet Airways, a listed entity, made public its financial woes, asking employees to take a 25% wage cut. Meanwhile, India’s national carrier, Air India — delaying payday every month for some time now with August seeing the longest delay — kept mum, apart from an internal memo that blamed “circumstances beyond control”.

No surprises there. As a public sector utility (PSU), this is how Air India is supposed to be: vague, and lacking accountability. Over the last few years, the incumbent government has struggled to figure out what it can do with the loss-making airline that has an albatross of debts around its neck.

It sought approval for a Rs 980 crore funds infusion in end-July. There is pressure to seek more. Surely, the sarkari bag is running out of tricks to keep Air India flying. The revival plan of 2012 has already seen more than Rs 27,000 crore being pumped in. This may be a good time to try thinking outside the box.


Take the recent efforts in March to privatise the airline, offering a 76% stake to the best bidder. It found no takers. Air India has a debt of Rs 48,000 crore on its balance sheet, and a similar amount in accumulated losses.
Even with GoI backing it, the airline should be considered bankrupt. Answers can’t be found in the case histories of past PSU disinvestments. There are, however, some pointers in the present. Why not take a close look at the Insolvency and Bankruptcy Code (IBC) that is sorting out private sector companies with crippling debt?

Air India need not go all the way. Instead, it could learn what can work for it. The most attractive part of the process monitored by the National Company Law Tribunal (NCLT) is the clean break that it provides a new owner. First, the debt is paid off in full. Second, the former promoter and its vestiges are also exorcised. Can this kind of a clean slate be offered to a bidder for Air India?

This means that the government will not only not hold any equity in the airline or its subsidiaries, but it will also not commandeer a couple of aircraft each time the prime minister, the president or the vice-president decides to travel abroad. Each such visit takes the two aircraft plus staff out of service for a few weeks, given the necessary maintenance checks. A full separation of GoI from Air India will mean the creation of a fleet of aircraft for official government use, to be maintained by Air India, the service provided at arm’s-length pricing.

Any solution from the IBC kit will also mean cleaning up the airline’s debt with the proceeds made from the sale. For that, not just the government, but the larger polity must accept that the country’s exchequer can’t find a surplus while selling a bankrupt company.

There is no way a stake sale in Air India can help lower the fiscal deficit.

Meanwhile, we, as a nation, can also get rid of sentimental notions about Air India going back to the Tatas, its original founders, or, for that matter, to any existing major airline. Most of the suitors for Jet Airways’ equity today are private equity players. Surely, some of the international funds will also be interested in Air India if a clean slate is offered. It is not unusual for flag carriers. The largest shareholders for Australia’s Qantas, for instance, are JPMorgan, HSBC and Citi.

For it to fly, that idea will surely need political gumption and salesmanship of the highest order. Not quite the stuff agovernment might want on its plate in an election year. In fact, the sell-off is already on the backburner.

Improving operations at the airline, and ensuring that its planes keep taking to the skies, may be the only options now. But GoI needs outside help, and there is a prototype tried out by the steel ministry last year. In April 2017, the Steel Authority of India Ltd (SAIL) engaged with veteran steel industry majors and a consulting firm to turn around its steel plants.

Among others, it brought in former Tata Steel deputy managing director Tridibesh Mukherjee, and B N Singh, who has led both PSU and private sector steel firms. They worked alongside Boston Consulting Group (BCG) and were responsible to help turn around specific steel plants. SAIL started recording quarterly profits from the second quarter of 2017-18.

Can Air India think along those lines and let, say, former IndiGo president Aditya Ghosh or Air Deccan founder GR Gopinath offer their expertise to turn the ailing airline around? Fingers crossed, but don’t hold your breath.