India Insight

India, Pakistan find common cause in shoddy national carriers

Anurag Kotoky

Feb 16, 2012 09:10 EST

The two are nuclear-armed, arch rivals often threatening the stability of South Asia and with little common ground, but the sorry state of their national carriers puts India and Pakistan on the same pedestal.

India may be an emerging superpower and Pakistan seemingly always on the brink of a disaster, but the national carriers of the arch-rivals face similar woes.

Both carriers — Air India (AI) and Pakistan International Airlines (PIA) –- are struggling to stay afloat, battered by financial woes and mismanagement.

Amid a major cash crunch and reeling under heavy losses, Air India and Pakistan International Airlines are struggling to continue operations — a shame for the state-run carriers which often are the defining images of their countries.

“Financially unviable” is the term attached to both carriers by lenders and both airlines have so far just managed to survive on taxpayer money.

The Indian government, battered by allegations of graft, and with the opposition snapping at its heels, can’t even afford to shut the airline down primarily on fears of a political backlash.

While Air India struggles with striking pilots, the state of publicly-listed PIA is worse.

India’s unfriendly skies

- Saritha Rai writes for the GlobalPost, where this article first appeared. -Not long ago, passengers of India’s airlines were spoiled with choices. One promised to treat them like a maharajah. Its passengers were greeted curbside by friendly staff who eagerly took their bags. Once aboard, glamorous female flight attendants waited on the passengers.Another offered meal choices from a list so long that it ran off the page, even on flights that lasted less than two hours. A third had fares so low that thousands of train passengers found it cheaper and faster to fly.”I always felt like royalty when I traveled, it was all so unreal and fantastic,” said Janaki Murali, a frequent flyer who works with one of India’s largest outsourcing firms based in Bangalore.Alas, it was also too good to last.Last week, a grouping of 10 private carriers –  including popular upstarts Kingfisher Airlines and Jet Airways –  threatened to stop operations for a day on Aug. 18 to draw attention to their sorry financial plight. A strike, they reasoned, would be a dramatic way to get the attention of the government.And with reason. Private airlines have been a key part of India’s economic boom: they ferry more than half of the country’s passengers.But the carriers are hurting, due to a combination of slower economic growth and government policies. State taxes make jet fuel 60 percent more expensive, one of the highest tax structures in the world. (The government uses the funds to subsidize the cost of others fuels such as kerosene and diesel for poorer Indians.)Private carriers have long lobbied the government to reduce these aviation fuel taxes, as well as high airport charges, so far to no avail.Vijay Mallya, the flamboyant owner of Kingfisher Airlines — which is named after Mallya’s beer brand — said India’s airlines were being “taxed to death.”For now, the crisis has been averted. A public outcry and a tough-talking government forced the private airlines to back off from their strike plan. The Federation of Indian Airlines (FIA) said that the boycott was canceled “in view of the agitated public sentiment” and the government’s call for a dialogue.But some of the private airlines’ woes have been their own doing. During the aviation boom of the last few years, private airlines have proliferated.Many airlines, including Kingfisher and Jet Airways, have built up excess capacities, even as cut-throat competition and falling demand for air travel have eaten away their profits. The FIA said India’s airlines lost $2 billion during the last financial year.But even as private airlines demanded the government ease some of their financial burden, Delhi is considering handing a $3 billion bailout package to the national carrier, Air India.The bloated state-owned airline is a loss-maker crumpling under its own debt. Air India has 147 aircraft but about 47,000 employees – making it the most profligate employee to aircraft ratio in the world.Meanwhile, private airlines are also pushing the government to ease the current rules that ban foreign carriers from buying a stake in domestic airlines.For many, foreign investment appears the only hope for raising funds, a challenge at a time when the biggest global airlines are themselves cash-strapped.Clearly, the days of big orders for planes, new routes and lavish marketing budgets are over. Right now, India’s airlines are just fighting for survival.For passengers like Janaki Murali, who had quickly gotten used to the premium service and an abundance of flight choices, that is a hard landing indeed.More from Global Post:The Ugly IndianThe Mormons in IndiaCan you outsource God?

Uneasy numbers stacked against Air India

State-run Air India, which enjoyed a monopoly in the country till the deregulation of the aviation sector in 1991, is besieged by ballooning debt and a litany of woes, pushing it to the brink of collapse.

Unless, of course, the central government steps in to bail out the national flag carrier.

Air India is now seeking a 39.81 billion rupees package from the state, though the airline has been asked to come out with a plan of action to make its existence viable.

The money may come as federal aid in the form of equity and loan.

But some say the airline needs a credible action plan to rescue it.

The civil aviation ministry says the 31,000 workforce should be trimmed to keep it viable. Estimates put the average number of employees per aircraft at nearly 1:230, while as per international standards, an airline needs 1:100 -150 employees.

Others question whether the ministry, which presides over the National Aviation Company Ltd created to run the merged Indian and Air India, can absolve itself from the faultlines posed by the bloated workforce.