AI needs operational freedom

Written by Shaheen Mansuri | Mumbai | Updated: Jun 28 2009, 02:45am hrs
Air India, which is going through a rough weather, should be freed of government control, said former disinvestment & privatisation minister, Arun Shourie. While speaking on the sidelines of the fourth global meeting of the Emerging Markets Forum in Mumbai, the former minister said, Air India should be liberated from government control. It should be given operational independence. He also mentioned that strategic partners from the private sector can bail out Air India.

The minister, during his tenure as the disinvestment minister, had proposed privatisation of Air India. Singapore Airlines, partner of the Tata group for a 40% stake in Air India, had bid to pick up stakes, but later pulled out due to strong political opposition.

Meanwhile, on Thursday, AIs CMD Arvind Jadhav assured the airlines unions that the carrier will not be privatised. However, industry observers are of the view that there will be opposition in the beginning if there are disinvestment proposals for a PSU like Air India.

The carrier is going through a critical situation. If a strategic decision is not taken fast, the situation will worsen just like the erstwhile low-cost carrier Air Deccan, which had to sell majority stakes to Kingfisher Airlines. Bailout package is not the solution to a host of problems that AI is facing, says an official at AI.

He further added that the carrier is faced with enormous operating costs, low passenger load factors and mounting losses to the tune of Rs 4,000 crore for FY08-09.

At a time when the airline is struggling to keep its head above water, strategic investment in the form of foreign direct investment or private participation to run the carrier makes business sense, he added.

Nacil (National Aviation Company of India Ltd) which runs AI, had started sending feelers regarding a possible stake sale to carriers like Singapore Airlines and German airline Lufthansa in January this year. The move came after a proposal in the Cabinet by civil aviation minister Praful Patel to allow foreign direct investment of up to 25% in Indian carriers. However, the proposal did not see the light of the day at that time. The loss-making carrier was also pushing for an IPO in 2008, but the slowdown in capital markets forced it to defer its entry into the markets to raise equity.

At present, AI is struggling to survive by taking some stringent actions. It is mulling to cut the employee strength of 35,000 by at least 20%. The carrier has requested its higher-rung executives to forgo salary for July. This initiative would bring down its remuneration bill by Rs 45 crore for the month.

The CMD has also set up a committee on cost rationalisation. The committee has been directed to discuss cost rationalisation and reduction of wasteful expenditure with employees unions and submit its report by July 15.

Prescription for AI

Air India should be liberated from government control

Strategic partners from the private sector can bail out the airline

During his tenure as the disinvestment minister, he had proposed privatisation of Air India

Singapore Airlines had bid to pick up stakes, but later pulled out due to strong political opposition