It may not have lasted long, but the threat by India?s major private airline operators to go on strike was a shocking indictment of the manner in which entrepreneurs in this sector operate. One would have to look really hard to find other instances of the capitalist class threatening a strike?that is usually the domain of trade unions or senior management of some public sector companies. In this instance, rather ironically, the state-owned company, Air India, was the only major airline that did not join the other potential strikers under the banner of the Federation of Indian Airlines. Surely, there are better ways for the private airline operators to convey their views to the government and public at large. If anything, the threat of a strike robbed them of credibility and led them on to the wrong side of public opinion.
That is a particularly unfortunate outcome for the private airlines because some of their grievances are justified. Perhaps their strongest case is on the extremely distortionary government policy on aviation turbine fuel?taxes are not only very high, which makes ATF in India more expensive than most places in the world, but they also vary greatly across states, going up to 30% and above in some cases. There is an urgent case for reducing the tax rate and making it uniform. The other alternative is to allow airlines to import ATF, which is not allowed in the current regime. The second grouse that private operators have is on the issue of Air India receiving a government bailout. After all, it isn?t the only airline facing rough weather because of a weak economy, so if the government is inclined to bailouts, surely everyone should get one. Our argument in these columns has been simple: no one, including Air India should get a government bailout. In fact, all the airlines in India, including Air India, need to rework their business models in the context of the changed economic scenario. Most of the private operators had over extended in the period of boom and are paying the price in the slump. Any bailout will simply prevent restructuring. Airlines need to work on alternate strategies like sharing infrastructure, leasing out aircraft and rationalising routes. That said, the government too must take its share of the blame in this fiasco. There is no independent regulator for the airline industry which can take a neutral view of some of the most contentious issues, including airport charges. DGCA is simply inadequate. Also, the Competition Commission of India ought to awake from its slumber?if this potential, coordinated strike is not evidence of cartelisation in the civil aviation sector, then what is? Even on earlier occasions, there have been suspicions of coordinated action on the part of private operators. In the absence of a regulatory authority for civil aviation, the competition commission needs to urgently step in.
