The issue of whether the airline has a future has been frequently posed, especially in the era of growing private airlines.
But Minister of State for Civil Aviation believes the government can still revive the carrier.
What is the condition of Air India?
Air India has the reputation for making consecutive losses.
It recorded an operating profit in fiscal 2015-16 after almost a decade.
It was mainly due to a fall in oil prices, but still ended the year with a net loss.
Years of consecutive losses have also ruined its overall financial position and pushed the airline into a debt trap.
In 2011, a group of public sector banks that gave working capital loans to Air India was forced to reduce the airline’s debt load.
A bailout package of over Rs. 30,000 crore was also extended by the Centre in 2012 to deal with losses.
Yet, by the end of 2015-16 Air India still carried a debt load of about Rs. 46,000 crore.
The cost of paying interest on the debt alone was putting huge pressure on earnings.
What are the actual problems?
The above mentioned situation has led many people to believe that the airline has problems with its capital structure.
The government is working on a plan to improve the airline’s financial position, corporate governance, and management.
The government’s plan is unlikely to work because main problems that surround Air India are structural.
It also ignores the reality that the debt burden is the product of bureaucratic mismanagement and operational inefficiencies, including overstuffed workforce.
The public ownership has also left the carrier’s management subservient to the interests of the political class.
What should be done?
These issues can be adequately addressed only if there is a change in ownership.
But Private buyers are unlikely to come forward to buy Air India, as its debt load easily eats up any operating profit.
In that case the government can either force public sector lenders to incur more losses, or use public funds to pay them out.
Either way, it is not worth spending more government funds on Air India’s revival
A profitable private airline can easily fill any vacuum left in the market by Air India’s exit.
