Air india struggling for a competitive position

State-owned Air India, the airline that operates domestic and international routes, is losing huge amounts of money a month and urgently needs financial resuscitation. As the new Chairman and Managing Director Arvind Jhadav tries to put together a rescue package, fingers have been pointed at Civil Aviation Minister Praful Patel for several decisions in his last five years as minister that allegedly damaged the struggling airline’s competitive position. In an interview with senior editors of Business Standard, Patel discusses the airline’s problems and defends his record.

Air India has never operated smoothly. Its history shows that it has run well for some time and then again fallen. The reasons that dog the airline are the high cost of manpower and inefficiencies inherently built into the organization, coupled with external factors like the slowdown.

An attempt was made by the earlier government in 2003 to sell Air India, which did not fructify because Tata-Singapore International Airlines backed off. In 2004, when we took over, A-I was shrinking and it had only 23 aircraft. Indian Airlines was better off. They initially came to us with an order for 24 aircraft. Air India was asked to revisit its order, considering that the market was looking up and we were starting Air India Express.

How was it justified? Was there a financing plan in place, considering the low equity capital base? On the surface, it would look like a recipe for disaster. This was always discussed in the government, that we cannot do business of this size without equity infusion. A very unfortunate part of government functioning is that we do not look at every aspect in one go. We decided in 2006 that we will come out with an Initial Public Offering (IPO) to bring in money for Air India. But that could not happen.

On the one hand, you were creating competition for Air India by offering liberal bilateral terms. On the other, you ordered more planes for Air India, but give it no money to finance the planes. You take the three decisions together and the airline has to die. No, I do not agree. Do not link one, two and three together. Bilateral, by definition, means it is two-way. If any airline can come to India, any Indian airline can also go out to that particular destination. And bilateral are decided by an inter-ministerial group, including the ministry of external affairs, not by the civil aviation ministry. For instance, we were told to give more bilateral to Qatar because we had signed a gas agreement with them. Buying aircraft was needed because the airline was shrinking. I am the civil aviation minister of the country, and my point is, does the civil aviation industry need to grow or not?