AIR INDIA PRIVATIZATION: THROWING BABY WITH BATH WATER
The government’s plan to divest 76% stake in Air India has generated a lot of debate in media, and not surprisingly, almost all the articles are supportive of the government’s plan. But, is privatization of a PSU really a solution to all problems? Are all private aviation companies very successful and are efficient? What happened to Sahara airline, Air Deccan or Kingfisher airlines?
On the contrary, we may like to compare Air India with other successful Government organizations, like ISRO, BHEL, Maruti or NTPC. It is pertinent to note that the ISRO has not a single engineer from the prestigious IITs, then also it has achieved such a phenomenal success.
Companies can’t have multiple objectives, they can only have multiple constraints. Ideally, companies should have only one agenda, either social welfare or profit maximization. companies can’t have both and yet become very successful. In the corporate world, all companies strive for “profit maximization”, though they camouflage it with confusing jargons like value addition to society etc
The aviation sector is the engine for economic growth of the country. Because of its unique nature, airline sector tends to be natural oligopoly and cartel formation is a very common phenomenon in such market. Hence this sector needs to be regulated by the government and government must have statutory powers and muscles to interfere and break cartel formation. Further, the government must have resources to intervene when there are disasters, or warlike situations, or Indian Air Force needs additional resources. Air India gives this power to the government.
We all are aware of the reasons for this sorry state of affairs of Air India. Some of the reasons can be attributed to government interference in daily affairs, in-efficient work culture of Air India, political pressure, personal interests of aviation ministers and uncontrolled trade unions.
Sale of Air India to one of the domestic airline will create a giant, and near-monopolistic situation. IndiGo, which had 39.8% of the domestic market share during February, can be the runaway leader by acquiring Air India which has a 13.8% share. IndiGo will also benefit if it buys the international operations of Air India as some of the slots held by the national carrier are otherwise very difficult to obtain and it will become a major brand for Indians to fly internationally. As a result, Indigo will become a far more formidable force to control and may become a cartel leader. Same is the case with Jet Airways, which currently has about 16.8% of the domestic market share, and it could close down IndiGo’s lead in the domestic segment by acquiring Air India. Jet Airways can also become a destination airline internationally by acquiring Air India rather than a feeder airline which feeds passengers through its gateways in the Middle East and Europe.
Despite all the bad news about Air India, the airline can still be recovered and made profitable. For this, it needs strong leadership at the top, complete operational autonomy like ISRO, singular focus on becoming profitable, public image management and changed work culture. All these are within reach and can be easily managed by strong leadership.
It all has to start with a strong political mandate to stop meddling with the autonomy of airline. All politicians and bureaucrats have to stop interfering in the running of the airline. Why should the government decide about type and quantity of aircraft to buy, or which routes to operate? Then only the airline can be made accountable for its actions and decisions, as accountability and autonomy are two sides of the same coin.