Air India’s privatization and a regulatory deficit
2 min read 10 Oct 2021, 06:37 PM ISTThe airline was so poorly run by successive governments that its purchase by the Tata Group has spelt relief and hope. Needed now is a strong independent regulator for civil aviation
PremiumThe news of Tata Group acquiring Air India has been welcomed almost universally; ‘almost’ because it is not known if all employees of the once-storied airline are equally elated. Even if they feel dispirited by the news of a new owner, which some are bound to, they are probably in a minuscule minority in the country. The buyout has been received widely with equal measures of relief and hope. Relief because fears of the airline shutting down due to mounting losses seems to have now receded. And there is of course hope that the Tata Group will make every effort to revive and restore the airline’s past glory. The government has been keeping the air-carrier alive on life-support, having pumped in over ₹28,500 crore as capital between 2009-10 and 2017-18. The Tatas will take over only a portion of the airline’s outstanding debt, but will have to do without its real-estate assets, which, presumably, the government will use to partially retrench some of the remaining debt.
The government’s sale of its 100% stake will see Air India finally join a long list of airlines the world over that were once owned by national governments but have since been privatized. Qantas, Air Canada, Lufthansa and British Airways, among others, are today flag-bearers of high-quality and reliable aviation services with a focus on customer acquisition and retention. It has not been easy, especially as the aviation industry’s frequent boom-bust cycles have also resulted in recurrent blood-letting, which invariably reflects in the quality of customer service. There are, on the other hand, some successful airlines which are still state-owned—such as Singapore Airlines, Emirates and Etihad—but compete with private carriers on both service quality and efficiency parameters. In all these cases, success could be attributed to professional management teams being given a free hand to develop strategy and execute it, with their performance judged on pre-set metrics.
This should be an object lesson if the Indian government wants to retain some of its public sector enterprises. Inept and corrupt government administration was squarely to blame for Air India’s collapse. Observers have often blamed the airline staff’s recalcitrance and shoddy service for its deterioration. That is a factor, but a minor one at most. The main reason has been mismanagement over the decades by governments of all shades, including bureaucrats and politically-appointed chief executives. Among other things, Air India has had a record of trading away valuable landing slots, acquiring aircraft far in excess of what is financially justifiable (thus saddling it with a mountain of debt), fudging accounts and going in for needless expenditure programmes. None of this would have been possible if we had a strong independent regulator for civil aviation. The weak spot of the entity currently in charge is its lack of autonomy and its apparent concern for the well-being of airlines over the welfare of flyers. Sample this: After commercial flights were resumed in mid-2020 after the covid freeze, the government (and not the regulator of civil aviation) allowed airlines to sell middle seats on flights even while parroting rhetoric about the benefits of social distancing elsewhere. With no state-run carrier left in a licensed market category, good regulation is even more important now. If the Centre wants the example of Air India’s privatization to serve as a successful template, it should have an empowered regulator that can use an even hand, focus on consumer interests, and keep crony capitalism at bay.
