The recent standoff of the pilots with the management in Air India once again brings to the fore the rot in the company and the way pressure tactics are used to harass the passengers and burden the taxpayers. Indeed, its poor record of service delivery and the large losses and bailouts make its existence and continuation difficult to justify. Flouted as the ?National Carrier?, the airline has become a national embarrassment.
Economists? argument for public ownership is grounded in market failure arguments. But here is a case of nationalisation of a well-run private aviation company in 1953 not for reasons of market failure, but in our zealousness to establish a socialistic pattern of society! Thus, the government, rather than promoting the market, decided to convert a well-run private company into a public monopoly and vested enormous powers of exploitation with the political class and bureaucracy and bestowed the blackmailing powers to the employees. Of course, different categories of employees? unions have different powers that they exercise liberally at enormous cost to the passengers. In the process, over the years, neither the management nor the employees see their main job as serving the customers, but looking after themselves, the bureaucrats who matter and, of course, the political masters. Not surprisingly, customers do not matter to Air India.
There are several horror stories of how the politicians (and their kith and kin), both from the ruling parties and opposition, have continued to exploit the airline. Holding up the airlines and changing the timings to suit their convenience is a minor issue. Only recently, a worthy former Prime Minister made the passengers wait for more than an hour because he fell asleep in the VIP lounge and nobody had the courage to wake him up! Similarly, our political and bureaucratic worthies shun the ?cattle class? and, therefore, upgradation for them and their kith and kin, even if that means offloading genuine passengers, is a routine matter. In fact, genuine passengers with valid ticket come last in the list of preference. I was told of an incident a few years ago when one of the Cabinet ministers who, on his visit to Russia, had a stroke and was admitted to a hospital and two first class seats between Moscow and New Delhi in Air India were kept reserved for him every day until he actually returned, and this was done at his instruction. Of course, in this case, the concerned ministry must have paid the bill. Now, it is even better. The worthies do not even have to pay for their spouses. Air India has a unique scheme of ?buy one get one free?! The free ticket to accompanying spouse solves the problem! It is particularly useful when the senior bureaucrats and politicians travel to Europe and the US. Don?t they deserve a paid-for vacation?
Obviously, when the objective of the airline is to look after its employees and serve the bureaucrats and politicians, the airline demands that its large losses should be bailed out. So long it was a public monopoly, people had no option but to pay for the poor service the airline rendered. However, with increased competition, the financial fortunes of Air India have taken a plunge. As the monopoly power was lost, the airline could not set the price to cover the cost. It nevertheless used all its tactics with the government to introduce protectionist policies such as government employees having to travel only by Indian Airlines/ Air India. But these have not helped. The net losses of Air India in 2009-10 are estimated at over R5,500 crore. After all, Air India has almost 40,000 employees, of which 20,000 are loaders and 10,000 are commercial staff. At about 120 employees per aircraft, this is the most employment-intensive airline in the world. The working capital debt of the airline amounts to a whopping R18,000 crore. Ironically, the Indian Commercial Pilots Association complains that the management has given up over 30 profitable routes to benefit private airlines. Indeed, when you do not care for customers, every profitable route will become loss-making and protectionist policies will not help.
The airline?s apathy for the customers is common and it now comes to be associated with the brand name. Cancelling the flights without any prior notice or delaying the flights for hours together has become all too common. Giving information is not a necessity. You can always ?regret? the delay as it happened because the flight ?arrived? late. And there are ?technical? reasons. When you go to the counters, it reminds us of an ?action replay? shown in cricket telecasts. Last week, I had a personal experience of having to make a booking at the airport in New Delhi for a return flight from Mumbai. As the Jet Airways (which competes hard with Air India to reach the latter?s efficiency levels) cancelled its 8.05 pm flight (9W 361), I decided to book with Air India (AI 101). Even as the gentleman at the counter was reluctant, he was left with no choice but book my ticket. I was in for a surprise when I went to the check-in counter at the domestic airport in Mumbai. I was told that the flight would depart from the International Airport! Neither the gentleman who booked the ticket had informed me, nor did the ticket carry any mention of this! Apparently, this is normal for this flight and, as I rushed out, a taxi driver was ready to take me on a costly drive to the international airport. I discovered in the flight that this is a regular practice and quite a few people, including Kiran Choudhary, the finance minister of Haryana, had the same experience!
Air India is surely not a viable idea and there are no sound economic arguments to keep it in the ventilator and load the huge burden on the taxpayer. Of course, it has a lot of high value real estate and, perhaps, some of it should be sold to provide funds for a golden handshake, particularly for loaders and some commercial staff. That would improve the marketability of the company and the government should go ahead and sell off the company. Half way houses will only cause more misery for the passengers and taxpayers.
The author is director, NIPFP. These are his personal views