Air India: should we shut it down?

June 5, 2012

Imagine yourself as the chief of an airline company. Here’s how things look there at a glance:

- You’re running an accumulated loss of 200 billion rupees (about $3.6 billion)

- You employ some of the best-paid pilots in the world. They have been known to go on strike whenever they want.

- You have 27,000 employees and 122 airplanes, the highest ratio of employees to aircraft in the world.

- You’ve been losing money for years.

You run Air India.

Newspaper reporters have been writing for years about who and what are responsible for this state of affairs. Columnists have rumbled on at length about why things are as they are. What nobody has asked: Why is Air India flying at all?

If the Maharaja is grounded, thousands of people would lose their jobs. The government plans to spend $5.8 billion over the next eight years to keep the airline afloat. But in a country with malnutrition worse than the sub-Saharan Africa, wouldn’t this be better spent elsewhere? Consider this:

- An Air India pilot earns as much as 800,000 rupees per month (about $14,500) plus $2,000 as a flying allowance, a bonus for flying (essentially, a bonus for doing what they already get paid to do). His counterpart at the erstwhile Indian Airlines — now part of Air India — earns 400,000 to 500,000 rupees (about $7,280 to about $9,100) a month, plus $1,200 per month as a flying allowance. Pilots from outside India who get jobs at Air India earn more.

But nearly 500 pilots are on a strike for parity of pay between Air India and Indian Airlines and who will fly the latest planes.

This is what the government is paying for. Rather, it is what the government is forcing Indian taxpayers to pay for. Imagine the alternative: instead of giving money away, India could just shut down the airline.

Possible gains include:

- Happier customers. Air India is hardly known for world-class service.

- Happier competitors. India’s other airlines can’t rely on the same kinds of subsidies, and they have financial problems of their own. They might appreciate some redirected revenue.

- Happier taxpayers. The billions now spent on Air India could help reduce India’s fiscal deficit, or be spent on the infrastructure, education and health programmes India so sorely needs.

9 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

YOU DON’T TAKE OPINIONS ON WHAT TO DO WITH A PATIENT. BUT THIS HAS HAPPENED FOR LONG WITH AIR INDIA DUE TO WHICH THE SICK PATIENT IS DEAD NOW. SO IT SHOULD BE SHUT DOWN NOW IN ANY CASE.

Posted by vasma | Report as abusive

//Happier customers. Air India is hardly known for world-class service.//

Well said. I live in London and we frequently fly Air India to go to India. My wife and son are flying one tonight (05 June 2012) and we as a routine check have been calling Air India office at London Heathrow since morning. Guess what. No one is picking up the phone yet.

Such is the status of the world class airline from India.

Just because they fly a huge aerodynamically designed winged people’s carrier in the sky, they can’t treat themselves beyond cabbies on road (no offense to cab drivers though).

Posted by maGiK | Report as abusive

90% of Indians will NEVER fly on Air India. Air India is for the Indian Elite (top 10% or less)

Posted by Abiiii | Report as abusive

look at it like this. Air India is business venture being run by its Promoters the Govt of India. In this case the sole shareholder is only trying to make its business a viable business. Now, what the promoter needs to do is to resolve its industrial relation by resorting to force if need be and restructre its business ( that is the point of training the pilots from IA to fly the dreamliner).
Once that is done the monopoly of the erstwhile AI pilots goes and the company gets better negotiation capbality with its workforce. As you can see by paring down the pay of the AI pilots it can save approximatley $ 7,500 per month for each pilot without compromising on the operational capabilities. Similarly economising on the Repair & maintenance capabilities, ground staff etc can lead to eventual financial viability and returns to the ultimate shareholders i.e. the citizens of India, or happier taxpayers as you are pointing out.
Can I have your comments on this?

Posted by Kirity | Report as abusive

It’s shocking that Mr Dass writing for Reuters a respected form of media, has got his information so mixed up. For him 2+2= 5 I guess. A study of the isue at hand should be done before writing articles like this one.

Posted by Indiareader | Report as abusive

you seem to be in a hurry to shut down the airline, but dont have the guts to ask who is responsible for this state of affairs and why are they roaming scot free instead of being behind the bars.
who ordered more planes than required and made to airline to bleed.were the planes ordered to receive more kickbacks?
why were most profitable routes of airindia given to other airlines?
please read this article
http://indiatoday.intoday.in/story/polit icians-bureaucrats-who-killed-the-mahara ja-of-air-india/1/199062.html

there is a concerted move by vested interest to see that the airline is closed. I wont be surprised if the same vested interests have bribed the pilots to go on a strike during the peak season and bring disrepute to the airline.

the employees of the airline have the ability, expertise and will to turn around the airline, but unfortunately the leadership is lacking the conviction required for this because babus who dont know the abcd to airline industry are thrusted at the helm of affairs.

We need a man like late Air chief marshall P C Lal who in the seventies took charge of indian airlines and turned around the airline within no time.

the govt wants the airline to run because they want their 800 MPs to get VVIP treatment.

Evven if you wish in your heart of heart to close down this airline and sell it cheap to mallyas and goyals, it will not happen.

Just mark my words In the next 3 years this airline will show profit just as japanese airline has shown this year provided they gat a man like P C Lall

Posted by wb787 | Report as abusive

As mentioned; You’re running an accumulated loss of 200 billion rupees (about $3.6 billion)
Firstly, even a loss making giant can be profitable to certain “maharajas” in high chairs. Secondly, taxpayers money has no accountability, which means a safe bet for non-performance.
Instead of thinking of Air India to be shut, it may be privately managed with zero government stake or interference.

Posted by Vibes | Report as abusive

the situation of airindia today purely due to total mismanagement during the last five years by the govt. Had the HR issues been resolved immediately after the merger, the situation would not have deteriorated.

However, better late than never. The Minister Mr. Ajit Singh has rightly taken a tough stand. If you can run 75% of your flights without the striking pilots, it means they are redundant.

The plans declared by the minister to lease boeing 777 and use fuel efficient 787 and the announcement of VRS for its employees are all in the right direction. I would request him to just take one more good decision. Please for God’s sake appoint a new COO who knows the airline inside out. Give him targets to turn around and give him full support. Once the HR issues are resolved, the airline will certainly start making profits. A strong will at the centre is a must and i am sure Mr. Ajit Singh will do the needful.

Posted by wb787 | Report as abusive

ABSOLUTELY. No questions asked. How can an entity like Air-India operate with losses like that for years and not be accountable. the government’s job is not to provide employment. Their job is to create right kind of environment for businesses to flourish. Let private sector take the risk of starting an airline to ferry relatively well off from place to place. I can still understand why government is involved in Railways since a lot of folks who use it are middle class or lower in terms of economic condition of their household.

Posted by KINP | Report as abusive