12 hours that’s what it took. The fears that the Air India’s losses might spiral up to heights of 5000 crores have come true, the losses now stand at 7200 crores. But in no sooner time the media is out with its own “read to analyze articles”. The papers are full of why how Air India has been spiraling down from the past 2 years. Welcome change though the whole issue of Gayism and its pin up girl Celina Jaitley (who got some welcome headlines) was getting quite irritating.
Staying in aviation business is no child play JRD Tata was smart enough to understand that. Pioneering an industry has never been the forte of any government across nations and similar was the case for the airline industry. Many countries have national airlines that the government owns and operates. Fully private airlines are subject to a great deal of government regulation for economic, political, and safety concerns. Private players now rule this sector. But then the global recession and terrorism to a large extent have caused some worry to all carriers across the world. If we do go back to history air travel has survived largely through state support, this came through in way of equity or subsidies. Risky and costly is the best way to describe this industry but one has to outweigh the microeconomic losses by sighting higher growth due to global mobility. Over the years many countries have privatized their national airlines in order to improve profitability in the future and this has paid rich dividends. Innovations such as the low cost carriers have made their mark. Thus today many large airlines today are privately owned and are therefore governed by microeconomic principles in order to maximize shareholder profit.
But then as mentioned earlier this is a industry which has high operational costs. Aircraft financing by itself can be quite complex. Since this is an industry which gives high importance on safety newer planes with better safety features are being designed throughout and carriers must upgrade their fleet which is why they need to take major long-term fleet decisions with the goal of meeting the demands of their markets while producing a fleet that is relatively economical to operate and maintain. But then being capital intensive is not the only problem alone. Hedging oil and fuel prices also play a major role in the operational costs of an airline. Another important factor amidst all of this in view of the congestion apparent at many international airports, the ownership of slots at certain airports (the right to take-off or land an aircraft at a particular time of day or night) has become a significant tradable asset for many airlines. Clearly take-off slots at popular times of the day can be critical in attracting the more profitable business traveler to a given airline's flight and in establishing a competitive advantage against a competing airline.
One can wonder the reason for the discussion of the high level of economic forces but then most of the reasons cited out by the EXPERTS pertain to the above. The problems plaguing the national carrier are numerous but then ceding market share and bad routes top the reasons along with the merger which has lead it to so called spiral down. Bad routes cant be complained about especially when the airlines operates out of some of the most inhospitable places ie within India. Most private players have virtually no planes going to the north eastern parts of the country. Many small towns and cities are still yet to be served by private aircrafts. The fact that Air India operates out of such places goes down completely UN noticed when it comes to “Bad Route Planning”. Not to mention the cost of operating a Airport and the maintaining the ground crew at these places. But then the so called EXPERTS fly in or out only from the major towns. The market share has clearly dipped and the major cause has been the private players taking fair travel to newer heights. Most of Air India aircrafts were delivered back in the late 1980’s its surely could not compete the newer “Dream liners”. We did go ahead and order better planes but then in days of a recession delivery issues plagues everyone and thus the carrier had to Dry Lease planes. The merger surely did not go as planned but then merging 2 giants was not going to go happen without any glitches. The media ever so vocal about “Privatization” has been going on rattling about it. British Airways was privatized one would want to check out its state after the government gave up its control. The Rod Eddinton era resulted in a 50% slump in profits. Similar scenes were repeated post September 11th when most of the private carriers faced problems of liquidity, high fuel prices and drastic reduction in travel. The players responded by drastically cutting workforce and selling of stakes to investment bankers (German subsidiary Deutsche BA was sold to investment group Intro Verwaltungsgesellschaft). Fresh equity was also raised to pay off debt.
Try doing rather mentioning of doing the above in India. What would result is a huge dharna outside parliament. How can even someone dream of throwing out people out of government organization. Try selling of stake the Left would probably leave no means unturned to see the government fall’s down. Raising an IPO in times of a volatile stock market is also not advisable. Someone needs to feel sorry for Praful Patel. Some complained that years of bad running have undone the carrier. But since the government took Air India over the whole accumulated losses were around 1000 crores. That figure in over 5 decades of existence is not bad. The carrier was hit hard by the recession and the fuel prices and probably the decision to buy planes did not come at the proper time. We talk aircrafts from Air India not flying and thus losing money. More than half of Singapore Airlines fleet was “Grounded” due to planes going half full. In days where airlines cant pay of fuel charges people are drying out loud that our planes did not fy hence did not make money.
As a national airline it was one of the best in Asia and the world. But then the recession took a toll on it as it did with many airlines globally. Alitalia have gone bankrupt and are shutting down operation. British Airways have reduced staff without giving salaries. But then being a PSU Air India cant resort to the above tactics. But then a restructure is required. The carrier is overstaffed and the professional standards for which it was known for have vanished. The future does look grave. But then necessary steps have to be taken. NPA’s need to be eased out and that would include staff also.
The MAHARAJA has been cordial enough time now it showed some resilient spirit.
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