Air India may have delivered significant improvement in its operational and financial performance in the past few quarters, but the existence of several structural issues, unless addressed, would upset the applecart, says global aviation consultancy Centre for Asia Pacific Aviation (CAPA) in a detailed report on the national carrier.
“Turnaround efforts are hampered by poor asset utilisation and low labour productivity. A comprehensive review of the business model is required across domestic, regional, international and long-haul operations as there are fundamental weaknesses in each of these domains. The management is faced with huge internal challenges, a fast changing external environment and excessive government intervention,” CAPA says.
FDI, a competition
The significance of this critical analysis is that it comes in the wake of the government allowing foreign airlines to pick up stake in Indian airlines.
CAPA says that turning around a national carrier today is more difficult than it was ten years ago because the environment has changed so dramatically.
“But it is possible if the political will exists to take tough decisions, a feature which has been absent to date. If Air India is financially and operationally restructured, it should subsequently be granted a level-playing field with respect to accessing foreign airline investment,” the aviation think tank says.
As long as Air India struggles under government ownership, it would continue to drive distortions in policy, deterring valuable investment.
Given the critical role that aviation plays in enabling economic development, such distortions are not in the national interest, it says.
Lacuna in framing policies
Highlighting the lacuna in framing policies and political interference, CAPA says “the decision to strengthen Air India Express’ base in Kerala appears to be a politically rather than commercially driven decision. It would be a strategic mistake to focus primarily on Kerala and neglect other important markets across India, leaving them open for Indian or foreign LCCs to develop their own fortresses.”
It says, the combination of stronger Indian competitors, as a result of foreign airline investment, the growth of LCCs, the opening up of the international market and the changing nature of global alliances will impact every aspect of Air India’s operations.
“The pace of change in the market is so rapid that it puts into question the validity of the turnaround plan that has been developed for Air India. The government may have to open a cash tap to keep national career flying in the coming years.”
“Without decisive (and in all probability painful) action, the government could be faced with unthinkable funding requirements for Air India.”
“Apart from drip feeding billions of dollars to finance operating deficits, fleet modernisation alone could require $12-14 billion of funding over the next ten year,” CAPA says.
Keywords: CAPA, Air India, civil aviation ministry
What and Who is this CAPA. Its just another private entity trying to
gain Airline Consultancy Business in India. CAPA was always saying "Jai-
KingFisher" till KF finally sank. Private model only Sinks Indias Wealth
and prevent publicity of truth as seen mutiple times.
How can we assume a Airline like Ethihad that is only 6yr old bring
bring Expertise to India. Coming years we till what damage it will do to
India like KF story.
The Air India is not a feasible economic entity of the Indian Government. It is maintained by the Government of India for easy and preferencial travel of the politicians and government officials at the expense of crores of rupees at loss by Air India. The Government of India keep on proping up the Air India every year with crores of rupees. The Air India is too big for India to fail. Hence the Government of India writes off all expenses to maintian the flagship carrier of India, similar to the expenses for the Indian military. Air India cannot compete with private airlines of India or with the private airlines of any country. Then, why should we have this white elephant in the country?
Why a poor, developing country like India should bail out this under performing airlines year after year when the state has so many other expenditure priorities and fiscal deficit is skyrocketing! Why doesn't the govt privatize the airline while keeping a minority stake and let us if the private sector can produce a national airline that is not a burden on the tax payer while also providing internationally competitive great air travel that Indians can be truly proud of. I never flown Air India and would like to avoid it as long as it is known only for its shoddy service and horrendous on-time arrival.
Even after 65 years of Independence, India has failed to build a civilian aircraft till date. Most of the government funded IIT educated engineers fly to foreign lands to develop those countries. The LCA Tejas project was sabotaged for Politician kickbacks in MMRCA deal.
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