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The Claim About Air India's So-Called Turn Around Is Laughable

12/05/2016 11:09 AM IST | Updated 15/07/2016 8:26 AM IST
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INDRANIL MUKHERJEE via Getty Images
An employee is seen behind the ticket window of India's flagship carrier Air India displaying its logo the 'Maharaja' at the domestic airport in Mumbai on April 28, 2011. Air India said at least 50 of its flights, including one on an international route, have been cancelled since the start of the pilot's strike over pay. AFP PHOTO/Indranil MUKHERJEE (Photo credit should read INDRANIL MUKHERJEE/AFP/Getty Images)

When the Civil Aviation Minister announced that Air India (AI) has had a turnaround, many went gaga. An ill-informed nation with an army of fan clubs supported by a compliant media is good recipe for an economic disaster. Fact is, this claim hides more and reveals nothing new. The minister talked of an operating profit of ₹8 crore due to 11% cost reduction because of "operational efficiency". If we go by the interest rate that any other airline (like Kingfisher) would have been charged, that would translate to a net loss of ₹6500 crores (Air India has a debt of ₹51,000 crore). For the record, the losses of AI were ₹5490.16 crore, ₹6,279.6 crore and ₹5,859.91 crore in 2012-13, 2013-14 and 2014-15 respectively.

A nation faced with drought and thousands of farmer suicides each year is throwing ₹30,000 crore of good money on a bad Air India.

To understand AI's performance and efficiency, we should see how other airlines performed. Jet Airways, which had a loss of ₹1813 crore in 2015 has a net profit of ₹777 crore in the first nine months of 2015-16. SpiceJet which had a net loss of ₹687 crore in 2015 has a net profit of ₹334 crore in the first nine months of 2015-16. Please note that this is net profit and not operational profit.

The "operational efficiency" of AI is largely because of the fall in the price of crude oil. For the quarter ending December 2014, SpiceJet had a turnover of ₹1301 crore with fuel cost being 44% of revenues at ₹562 crore. For the quarter ending December 2015, SpiceJet's turnover jumped to ₹1439 crore and fuel cost slumped to 25% of revenues at ₹364 crore, reflecting fall in crude prices. While SpiceJet's operational efficiency improved by 19%, Air India underperformed with an efficiency of only 11%. This is largely due to the load factor and resultant yields. If you have an On Time Performance (OTP) at 78.4%, it has to show on load factor, isn't it? Imagine that you have 21.6% chances that your flight will be late!

It's high time that Modi wields the stick against AI and shows them the door... Modiji, also tell your minister to stop peddling lies as half truths.

Air India is currently on a ₹30,000 crore bailout package. Kingfisher shut down for a fraction of that. A nation faced with drought and thousands of farmer suicides each year is throwing ₹30,000 crore of good money on a bad Air India. Every government -- UPA and now NDA -- is giving false hope to the nation by releasing limited information. It is high time we wash our hands off Air India. You leave the space and private players will step in to fill the gap. In any case, does a state really have to run an airline and a hotel chain, or manufacture condoms?

And talking of crony capitalism and private entrepreneurs turned villains, where would you put the ₹51,000 crores that banks lent to Air India? Is it an NPA in their books? Would the government pay if AI defaults? What happens to bank balance sheets if it is allowed to default? Most likely, we will have an Air India cess soon to pay for these losses. Would you rob us to pay for AI? It's high time that Modi wields the stick against AI and shows them the door. It is an opportunity for him to show courage, conviction and live up to his promise of a tough administrator. Modiji, please act and also tell your minister to stop peddling lies as half truths.

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