It is abundantly clear that Air India’s chances of survival as a state-owned airline is practically non-existent. The key to its survival undoubtedly lies in privatisation.

Once regarded as a jewel in the crown of the nation and the pride of the airline industry, the state-owned Air India is now engaged in a desperate struggle for survival. The finances of the airline are in a monumental mess and today the carrier has an unmanageable debt of Rs. 43,000 crore accompanied by a monthly interest burden of Rs. 220 crore. The carrier has repeatedly defaulted on interest payment and each time has been able to clear dues only through dole from the government. The airline has not been able to pay even the basic salaries on time to its 31,000 strong workforce leave alone the various allowances that constitute the major portion of their emoluments. Given an option, the financiers would declare the airline as an nonperforming asset. Efforts by the government over the last two years for revival of the airline through a comprehensive restructuring plan do not seem to have had any appreciable effect so far. The size of funds required for the airline to go through a revival plan escalates each time it is revised. The latest revival plan suggested by the SBI Capital Markets Limited calls for an equity infusion of Rs. 43,255 crore over the next decade. The airline would require 20 per cent of this figure immediately to clear outstanding dues of the Airports Authority of India—oil companies; refund of loan for acquisition of aircraft; and emoluments of employees.

The beginning of the downslide for Air India can be traced back to the mid-1980s. It was during the days of the Congress government when anyone in the political and bureaucratic establishments with the remotest connection with the airline began the era of subversion and reckless exploitation of the carrier. A golden opportunity to save Air India was lost when a move to privatise the carrier in the late 1990s by Tata in collaboration with Singapore Airlines was successfully thwarted by some powerful lobbies and vested interest groups. The situation for Air India took a noticeable turn for the worse in 2004, a point in time that marked the resurgence of airlines in the private sector pushing the intensity of competition to a new level. But it was the slew of strategic decisions by the Ministry of Civil Aviation (MoCA) since 2004 that proved to be far more debilitating than the fiercely competitive environment of the last decade. Orders were placed by the MoCA for as many as 111 aircraft valued at over Rs. 50,000 crore. The inordinately large order included a combination of 68 Boeing aircraft including 27 Dreamliners for Air India and 43 Airbus aircraft for India. The total number of aircraft ordered which was regarded as being way beyond their optimum requirement, resulted in a colossal interest burden the airline was in no financial position to bear. No convincing justification by the MoCA for this bizarre decision unknown even to the Parliamentary Committee set up to examine the aircraft deal has been forthcoming. Suggestions by observers, both inside and outside the airline, on the size of the order range from mere juvenile indiscretion to intent bordering criminal conspiracy that warrants a high level probe.

Another queer decision by the MoCA was to merge Air India and Indian into one entity called the National Aviation Company of India Limited, to be renamed subsequently as Air India. For a variety of reasons too numerous to dilate on, the merger has been a complete disaster. From a combined cumulative loss of Rs. 680 crore in 2007 prior to the merger, by 2010, the figure rose to Rs. 16,000 crore. While the decision in retrospect is being seen merely as ill-conceived by many, insiders do not buy the argument that the merger was undertaken to enable the combined entity to join Star Alliance. They once again point to intent behind this decision as being devious, meant to benefit rivals in the private sector. Latest reports indicate that in fact Air India is not joining Star Alliance. This perhaps is another subject for investigation.