Government would infuse additional equity of Rs.1,200 crore into Air India over the next few months and review its performance to decide on the future course, Civil Aviation Minister Praful Patel has said.
He, however, said there was no decision to divest government equity in the cash-strapped national carrier “at the moment“.
“It is imperative that we assess the situation after (a total of) Rs. 2,000 crore is infused as equity. Rs.1,200 crore will be given in the next few months,” Mr. Patel told PTI in an interview on the sidelines of the annual summit of the International Air Transport Association (IATA) here.
Government, as Air India’s owner, last year gave the airline Rs.800 crore as equity.
Asked whether government was mulling divesting its stake in the ailing carrier, he said “at the moment, the decision is not to disinvest and we stand by the policy of the government. Government’s decision is to have a national carrier and it shall continue to be so.”
On whether government would consider a “course correction” regarding the merger of Air India and erstwhile Indian Airlines following criticism from several quarters, Mr. Patel said “no, nothing of the sort. We have to make sure that it works well. We have to see how it performs (after the equity infusion). There has been no government subsidy to Air India“.
He said officials of all airlines attending the IATA Summit have opined that “mergers do not happen overnight. It is an ongoing process which has to be achieved over time. Air France-KLM has taken six years. Nobody has said merger is a one-day process.”
As costs increase and the airlines’ margins came under pressure, consolidation was “inevitable and nothing unusual“.
On Air India’s financial troubles, he said there were several options before the government to help the airline come out of it —— to allow the airline to go to the market, to go for an IPO (Initial Public Offer) or give it equity support. .
“In this case, government chose the third option“.
However, the Minister asserted “the worst is over for all (Indian) airlines, including Air India“.
On strengthening of the Directorate General of Civil Aviation (DGCA), Patel said government was considering granting it full autonomy and support the regulator in its functioning.
“We need to institutionalise this total autonomy” the government would like to give it, the Minister said, when asked whether a legislation would be brought for the purpose in Parliament.
Mr. Patel said the question of separating the regulator and an investigator of accidents was also being considered.
Currently, the officials of DGCA carry out investigations into incidents and accidents involving planes and choppers.
“A regulator, which makes rules, and an investigator should not be the same. The Court of Inquiry (into the recent Mangalore air crash) has been set up with (former Vice Chief of IAF) Air Marshal Gokhale. He is outside the DGCA,” he said.
To questions about having an independent investigator into all accidents including air accidents, he said “the intention is to move in that direction. A lot of discussion is required on the issue“.
Patel had earlier suggested that an independent accident investigating body like the US National Transportation Safety Board needs to be set up in India.
Asked about the Airport Economic Regulatory Authority (AERA) set up last year, he said it was making “good progress.
Issues relating to the Airport Development Fee and other airport charges are being regulated by them. Government does not come into the picture (on these issues) now.”
Regarding a spate of consolidation in the aviation industry the world over, Patel said “consolidation was a must” in the times of rising costs affecting the financial bottom-lines of the airlines.
He said allowing of cross-border holdings have started in Europe with Air France-KLM and Lufthansa-Swiss Air mergers.
Lufthansa has also acquired major stake in Austrian Airlines, U.K. carrier BMI and Brussels Airlines.
Participating in a discussion on the issue at the IATA Summit meet, Patel indicated that such cross-border holdings could hold the key for development of the airline industry globally. “It is happening in Europe now, it could be elsewhere some time later“.
In India, as also in several other countries, a foreign airline is currently not allowed to pick up stake in Indian carriers.
Referring to an estimation that ultimately there would be about a dozen airline brands across the world, he asserted that “whenever that happens, at least three airlines from India and three from China will be part of these 12.”
Maintaining that Indian aviation traffic had grown by a “modest 15 per cent” this year, the Minister said there was a huge potential for air travel which existed in the country.
“In 2004, the number of people travelling by train on a single day was equal to the number of air passengers one year. Now that has changed ... the number of train travellers on one day equals the number of three days of air travel.”
Due to this, the model of air travel has to be “redefined to meet the aspirations of the middle class... The bulk of the Indian domestic traffic will have to be at a lower cost, which will have to be met by a leaner, meaner and an efficient (airline) organisation,” Mr. Patel added.