If we study the prior experience of disinvestment of airlines the world over, we find an interesting pattern. Large airlines, taken over by strong contenders, have not only survived, but became consistently profitable over the years. The examples are British Airways, Air Canada, Japan Airlines, Thai Airways and Turkish Airlines. On the other hand, airlines that were small and did not have a viable network failed even after privatisation or disinvestment. The examples are SriLankan Airlines, FlyLAL-Lithuanian Airlines, Malév Hungarian Airlines and Mexicana de Aviación. Of these, Lithuanian, Malév and Mexicana have shut down, and SriLankan is back as a fully state-owned airline.
Therefore, if the precedent is any indication, there is a good possibility that with a large number of aircraft and a good network, Air India disinvestment could be a safe exercise if taken over by a financially strong group. Air India is a running organisation, with among the best technical people anywhere in the world, experienced pilots and a large domestic and international network. Air India suffered because of the legacy of bad decisions made by its owner—the government.
I remember an earlier aviation minister—when criticised by the media about the large expansion of the fleet—commented on television that “I am bringing in best airplanes to the airline.” He gave the example of turning over a new leaf by taxi operators who are used to operate old Fiat taxis by giving them a new Mercedes-Benz car. He simply forgot the economics of buying into expensive cars without looking at the financial viability of such a move. On top of that, if the profitable routes operated by the taxi operator are handed over to competitors before the purchase of a Mercedes-Benz, we can very well understand the future. That’s what happened to Air India.
Air India could not overcome such bad business decisions by the owner, and the owner paid the price by contributing crores of rupees of taxpayers’ money to sustain the carrier and keep it viable. Hopefully, the new owner would be smart enough not to repeat the same mistakes.
Any discussion on Air India would always turn towards inefficient airline workers surviving on taxpayers’ money. They would listen to the diatribe and get on with their work. This took a very big morale toll on the motivation of employees. If employees feel that they are being held responsible for the blunders of the owner, they would stop taking genuine business risks. They maintained the status quo in operations. They did a good job of it by keeping the flag flying. Even today, on most of the operational parameters, Air India is one of the best airlines of its size.
Air India pursers and air hostesses were always mocked at. But if you look at the reported behaviours of, say, IndiGo employees, they would seem like angels. Air India is a legacy airline with systems for training in place. Being a partner of Star Alliance, it meets most of the service quality parameters of a modern airline. What is killing Air India are the ill-motivated bad business decisions.
The current government has two tasks at hand. One, to disinvest Air India to the best suitor. Two, to recover the ill-gotten wealth from the people involved in milking the airline. The first task is urgent. But the second one should not wait longer. This is the last chance for the Maharaja.
Director, VES Institute of Management, Mumbai. Views are personal