Sometime in the 1990s a former civil aviation minister summoned a government official, who was reputed to have a good grip on the problems of what was then the Indian Airlines. The minister asked the officer to give him a one line reply to his question ? what plagues IA? The officer took the liberty of replying in two lines, ?The ministry is doing what it should not and vice versa.? Having understood the implication, the minister smiled and asked for a solution. The officer replied, ?The telephone lines between Patel Bhawan (which housed the aviation ministry then) and the Indian Airlines house should be cut.?

Little has changed since then. When Praful Patel rose to answer the Calling Attention motion in the Rajya Sabha recently, he defended the acquisition of 111 aircraft at a cost of Rs 44,000 crore and said that if the aircraft acquisition needs to be reviewed, it will be a decision of the Air India management. But the fact is that in the current Air India board of ten, at least three are civil servants, one is an independent director and remaining cut their professional teeth on Air India. What scope does that leave for independent functioning?

Let?s, therefore, revisit the aircraft acquisition. Note that if delivered on schedule, the aircraft will now cost the airlines around Rs 50,000 crore. The extra is explained by currency fluctuations and cost overruns.

There was no doubt that both AI and IA needed to acquire new aircraft. But what was the actual requirement and how was that estimated? In 1996, a committee was set up to look into aircraft acquisition for the public sector carriers. But that committee?s recommendations were abandoned in 1999 when country went to polls.

Back in power, the BJP-led government initiated another study on aircraft acquisition. IA finalised its acquisition plan study in 2002 and submitted it to the government. But no action was taken till 2004. IA?s plan was revived when the UPA government came to power in 2004. In September 2005, the government approved acquisition of 43 aircraft for IA at a cost of Rs 10,000 crore.

In AI?s case, the first acquisition plan was based on getting Airbus aircraft. But later, another committee suggested a Boeing fleet. The process dragged till 2000. In 2004, Air India reworked the existing plan, after being told to do so by the UPA government. This proposed acquiring 25 aircraft. A new proposal prepared in 2005 recommended acquisition of 68 aircraft at the cost of Rs 34,000 crore. Of these 68, 50 were for AI and 18 for Air India Charters, the holding company for AI?s low-cost international flying arm, Air India Express.

AI?s plan was approved in six months, by December 2005. IA?s plan, approved earlier in September 2005, had taken 18 months to get approval.

Some questions should have been asked then. Did a proper market survey accompany the doubling of the order for AI? Was there a proper analysis of traffic growth projection or of extra infrastructure and personnel requirements? Why were ?firm? aircraft orders placed? Such orders entail huge penalties if they are cancelled. Was there a good plan to meet the payments, principal plus interest, given that government equity injection was unlikely? In essence, one must ask what many who follow aviation closely have been asking: when AI decided to acquire many more aircraft than originally thought, was there a proper business plan?

If you find this puzzling, recall that just 6 months before AI and IA merger plans were firmed up, IA was renamed as ?Indian? in December 2005 and a great amount of energy was spent in re-branding. What kind of a business plan did that involve? Post-merger, there have been pleas to the government on equity infusion, soft loans and a grant. Here?s a comparison that captures what happened. In 2004-05, pre-merger and pre-big acquisition, AI and IA had both made profits as separate entities . Together their profit was Rs 162 crore. In 2008-09, the merged airline posted a loss of Rs 5,000 crore.

The author is in the business bureau, Indian Express