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. Sure, deferring salaries will give cash in the short run, where credit and revenue is tight. But more broadly, the airline industry is on the roughest patch in memory: Passenger traffic is down and fares are near rock bottom; carriers are racing towards the red as cost-cutting spirals further.
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.
Critics of privatization say a downturn is the worst time to do it. But the government never had the gall to make the move when times were good—so it had better muster the courage now to do so. Privatization is the only way to avert Air India’s dangerous nosedive.
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