Should Air India be partly privatised to increase its profits and solve operational issues? The latest report commissioned by the Corporate Affairs Ministry suggests so.
It is no path breaking thought, but pundits differ radically. Jitendra Bhargava, former AI director, is one of them.
“The need of the hour is to make AI professionalised than privatise. In its current state, with the current management and with the political leader this airline has no future. Then too privatisation is not the only solution. Because even private airlines are not doing well. Kingfisher is an example," says Bhargava.
The report however, states that bringing in private players and capital to operate India's national carrier will help address some of the airline's operational issues, while freeing government funds for other purposes.
"Partially privatising Air India would create incentives for the carrier to compete with other airlines, since Air India‘s private investors would seek to maximize return on their investment," states the study report on Competitive Framework of Civil Aviation Sector in India, commissioned by Indian Institute of Corporate Affairs, and conducted by Nathan Economic Consulting India.
Bhargava feels that the company has not been given a fair chance to be run professionally. “Recently, Minister Ajit Singh said that he wants report from AI within a week on how to increase market share. And how does it do? By announcing it in the media. He could have asked the board to work on it,” said Bhargava.
Analysts who feel that privatisation is not the answer, say that investors have not shown interest in the Indian civil aviation sector. “Over the last few years other than Jet Airways, no one has been able to attract investors. So why will investors look at Air India?,” asked Mahantesh Sabarad of Fortune Financials.
Sabarad says that the impact of privatisation would depend on the services that will be hived-off and the extent of stake sale. “If they are thinking of unbudling the low-cost carrier then that might help, since Alliance Air has not been doing well at all,” he said.
This report is not the first one to suggest private investment into the national carrier. Earlier, Dharmadhikari report suggested that Air India should go public. Among the supporters Sharan Lillany of Angel Broking feels that privatisation will bring in the much needed transparency. “With the government at the helm you will never get any clarity,” he added.
Analysts point out that perhaps the company (and the politicans too) should focus on improving the load factor on its aircrafts and try and reduce its huge employee base. According to media reports, AI has 221 employees per aircraft, much higher than any of the international carriers.
AI is still far off from any signs of normal operations. Recent numbers from industry body CAPA however for the first time sent positive indication. The report reduced the extent of AI's losses by forecasting it to be close to $1 billion which is still a staggering amount even as $300 million was knocked off from the projection.
The CAPA India Aviation Outlook 2012/13, projected that India’s airlines would post a combined loss of $1.3-1.4 billion for the 12 months ending 31-Mar-2013. These losses were expected to be accounted for by two carriers, Air India ($1.3 billion loss) and Kingfisher Airlines ($220-260 million loss).
