Wednesday, April 27, 2011

Shutting down Air India or selling it off are the only solutions to the continuing mess.....

The strike by Air India pilots doesn’t find resonance with most right thinking people in the country. Most people think that this is pure blackmail and find the demands of the pilots unreasonable. If the pilots are all so unhappy with their pay scales, why don’t they just quit and find other opportunities worth their while? Are they not concerned about the huge losses their company is making year after year? Makes me wonder (yet again) why the government should be in the airline business at all. Does it need to stay on?

It’s a well known fact that airline pilots make a huge pile of money. Apparently, senior pilots in the private sector make more than Rs 50 lacs per annum in salaries alone. Plus they enjoy many esoteric perks as well. In contrast, Air India pilots make much lesser. So what’s wrong in their demand for equal wages? Well....what’s wrong is that conceptually, it’s impossible for the government of a country like India to pay as much salary as the private sector does. In comparison with other government departments, Air India pilots are already being paid an obnoxious amount. The PM of this country gets a salary of less than Rs 1 lac per month. The pilots are already making much more. So unless pilots are motivated by their passion and the zeal of serving the nation, they will always find an Air India job to be commercially less exciting.

An airline is made by its people.....its pilots, its in-flight crew and it’s front-end staff. The right people deliver the right experience. On people issues, no government company can ever compete with private players. Air India cannot pay its pilots well. So the best pilots keep deserting it. Only the scum is left behind. Likewise, the government cannot attract the best crew. To make matters worse, its policies are such that it cannot force air hostesses and stewards to even do the basic things that airlines typically need to do. They cannot put weight restrictions on them; they cannot mandate them to look even reasonably presentable. They cannot enforce even basic service standards. It’s almost impossible for the government to provide a service as classy as one provided by the private sector. I remember an old joke about Air India hostesses.....the youngest air hostesses (“least experienced” though better looking!) would be assigned by the government to their lowest-grade airline: Alliance Air. The “relatively younger” middle aged ones (“experienced” in government jargon.....and starting to look ugly!) would be in Indian Airlines (economy section). The “relatively older” middle aged ones (“very experienced and very ugly”!) would be in the business class of Indian Airlines (ouch!).....and the really old ones (“most experienced and most ugly”!) would be in Air India (after all, flying internationally is a perk reserved for the most experienced)!

Poor salaries; inability to attract and retain talent; inability to build an environment of excellence leads to Air India delivering poor service. In a service industry, this alone would be reason enough for shutting down. For the government, there is yet another reason to shut down. There is a very real possibility of a scam emerging in Air India. The amount of money spent regularly by Air India on purchase of aircraft, maintenance services etc is huge making it a very likely place to have a scam. If the government is serious about reducing corruption, it has to end all such businesses where the chance of a scam is high (and the perceived value addition is low).

BSNL and MTNL are also examples of government companies in the service sector that should be shut down or sold off. These companies cannot attract talent; and they cannot provide topnotch service quality to their customers. There is always a risk of a big scam occurring since the size of their purchases is very large. There may have been a rationale a few decades back for the government to have started these companies (extending telephone services to rural areas etc); today that rationale doesn’t exist. The government should have divested its stake in these companies long back. It didn’t. Today, the market cap of these companies has fallen drastically. The companies are losing money. The government has lost most of its investment. In a similar way, if the government doesn’t exit Air India soon, there will be no value left in Air India to sell off later.

There is at least some merit in the government remaining in the Railways sector (even though I feel it should be partly privatized). There is zero merit in the government continuing in the airline sector. No one would miss Air India if it shut down.

The real truth is that the government continues with Air India for totally different reasons. Profit making has never been a goal. Losses are justified on specious grounds. If there were no Air India, how would our babus and politicians jet set around the country? How would they maintain their high-flying (though low paying) lifestyle? How would they take their family members on bharat darshans? That’s the real reason the government continues with Air India!


  1. Brilliant idea. I was thinking about the exact same thing. It will never happen though. Too many commies.

    What India needs is a 'Starve the Beast' kind austerity campaign.

    Now only if someone smart and young was interested in these things (hint... hint)

  2. No doubts. Govt should sell off Air India. I dont think it can be reformed. Govt employees by design have no service thinking and hence are useless for any jobs other than policing. Their callousness pushes passengers to other options. I would never use Air India whenever I have an option.

  3. iagree that pilots should be blamed they r highly paid still r so demandig they can buy a car or an omega constellation with such his=gh salary but i thionk air india should not close but agree to a certain extent with the poor pilots if ai shuts down india would not have a national carrier like pakistan has and sri lanka has airlanka which would be very humiliating to indias prestige.

  4. i think he is right airindia piolts r highest paid in their peer group.although i have travelled by air india and have noticed air hostesses behaving less friendly but they r kind.i think air india shall not shut down because india should have a national carrier and do u want india to be humiliated in front of pakistan and srilanka who have national carriers althpough it is corrupt it is indias prestige pilots and miisters both r to be blamed but not to call for a shut down.