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Indians Grow Weary of Socialism in the Skies - Bloomberg

Indians Grow Weary of Socialism in the Skies

By Chandrahas Choudhury - Jun 14, 2012

Two decades into their country's post-liberalization new economy, many Indians, especially the sizeable middle-class, have substantially revised ideas about government spending that were accepted without question in the old days of socialism. But the drift rightward is a slow one. If pressed for a "yes" or "no"' answer, most Indians today might still be sympathetic to the current government's adherence to welfarism and subsidies in the sectors of agriculture, education, food and labor. Increasingly, though, what the average Indian would cede to the government on the ground he would take away in the air. In the last decade India's moribund state-owned airline, Air India, has succeeded in leaching an astonishing amount of money from the pockets of taxpayers even as it has had its market share cut to 17 percent from 60 percent by more efficiently run private airline companies. A remarkable decade of democratization -- domestic traffic rose five-fold between 2003 and 2012, making India the world's fastest-growing domestic aviation market -- has also proved to be the sorriest span in the history of the company that was for long the face of Indian aviation. Two recent episodes exemplify all that is wrong today with Air India, which held a monopoly in domestic aviation until 1990. In April, Civil Aviation Minister Ajit Singh announced that the Cabinet had approved a bailout package of $300 billion for the airline, subject to certain performance milestones being reached over the next decade -- a move decried by most observers as a textbook example of throwing good money after bad. Worse was to come. In May, several hundred Air India pilots went on strike, protesting differential treatment within the company as a result of the merger in 2007 of Air India, the state-owned international airline, with Indian, the state-owned domestic one. The matter still hasn't been resolved, many of the airline's operations have been disrupted, some of the pilots have been dismissed, and losses have spiraled, thereby defeating any turnaround that the bailout might have created. A list of the problems afflicting the airline would require a book and not a column. They include the lack of a clear center of authority (the airline has a chief executive, but many decisions are also made by the civil aviation minister -- a post that changed hands twice in 2011), a fatal culture of entitlement on the part of employees and indifference on the part of the bureaucrats who manage
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Indians Grow Weary of Socialism in the Skies - Bloomberg

daily operations, massive outlays on a new fleet without a clear plan for a corresponding expansion in business, mismanagement of flying rights, troubles with reconciling the methods of the two companies after the merger, and even a tendency on the part of Indian politicians to see the airline as a kind of private taxi service. (Earlier this year it was revealed that last-minute changes were made to the airline's schedules in April 2010 so that the family of Praful Patel, the then aviation minister, could fly business class.) As civil aviation minister from May 2004 to May 2011, Patel managed to successfully finesse the contradictions of trying to direct the country's general aviation policy even as he tried to plot the future of Air India, and of overseeing the largest expansion in the airline's history even as he agreed that the airline was loss-making and should be sold. As Praveen Donthi, who published a long essay on the recent problems of the airline in the Indian monthly The Caravan last year, reported in "Praful Patel and the fall of Air India": [In an interview with an editor at the Business Standard in 2009], Patel presented his best, most honest and most reliable answer: I have been saying since 2004 that the airline should be sold, but I have been asked to keep it going. For the businessman-minister and many of his defenders, the notion that a state-run airline must inevitably fail was a trump card, an impregnable ideological defence to any allegations of mismanagement or neglect. Though the UPA coalition was headed by an economist who had cut India loose from its ostensibly socialist past, the government he led had decided to retain Air India as a public-sector enterprise, reversing the previous administrations attempts to sell it off. The airline seemed like a hopeless relic from the past, an idea that had overstayed its welcome. Nobody had a clue what to do with Air India, and Praful Patel was well aware of that fact. And in a piece called "India Doesn't Air-India," the columnist Vir Sanghvi supplied a history of the Indian government's flirtation over two decades with the idea of selling the airline, arguing it was time to finally cut the losses and move on: The best time to have done something about Air-India was in the early 1990s. In those days, the private sector had not yet entered the Indian aviation industry and the global model for privatization was British Airways. Margaret Thatchers government had taken state-owned BA and sold it off, in tiny chunks, on the stock market. The consequence was that British Airways was a listed company with thousands of shareholders, both individuals and institutions, who elected a board of directors and allowed the airline to be run professionally.

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Indians Grow Weary of Socialism in the Skies - Bloomberg

There was an informal agreement within the government that Air-India would be privatized in this manner and so Y ogi Deveshwar was brought in from ITC to run the airline as Chairman. Deveshwar ran it so successfully that by 1993, Air-India was making a profit of Rs 1 crore a day. (And in those days, a crore was a lot of money). Investors were drawn to the airline and had Air-India been floated on the stock market then, the listing would have been a huge success. But Prime Minister Narasimha Rao changed his mind. Successive governments also funked it. The NDA made a half-hearted attempt to privatize Air-India and Indian Airlines but then, scrapped the plan when it was dis-satisfied with the number and quality of bids. Since then, Air-Indias problems have mounted. Once the private carriers reached a critical mass, Indians began to regard Air India as a third-rate airline, hardly in the same league as Jet, Indigo and the others. Foreigners also stayed away in droves. Now, Air-India is no longer as attractive a proposition as it was in the 1990s. But privatization of any sort is still better than the mess we find ourselves in at the moment. Perhaps, AirIndia will not fetch a good price. But at least taxpayers will not have to pay Rs 30,000 crores to keep it in the air. True, but as Indians have repeatedly discovered in recent times, political calculation is much more short-termist and selfish in its approach than economic calculation. Among the marvelous but depressing quotes about the airline and the lobbies that influence its day-to-day operations is one reported last month by Heather Timmons in the New Y ork Times: Even inside the company, some executives are quietly calling for the end of government control. But Air India is popular with Indias central government because ministers and politicians can demand routes to connect their home states with the capital, New Delhi, even if they lose money. I feel like a woman with 1,000 husbands, one male Air India executive complained, referring to the constant demands from government officials. And an editorial last month in the Indian Express said bluntly: Air India should be seen for what it is: one of the last institutional holdovers of that dull, depressing time when the state felt that it alone could provide services to Indias population. Post-1991, that myth has been exploded, and notably so in Air Indias own business. Vast amounts of taxpayer money should not go to support a business on lifesupport. This strike is just another reminder of the uselessness of pretending that Air India can somehow be put back the way it was. It is broken beyond repair; the government must acknowledge that, and announce its strategy for shutting the carrier down.

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If Air India was shut down, it would certainly provoke deep nostalgia among hundreds of thousands of Indians, including myself, who knew no other way to fly in the first blush of our youth, and to whom it once seemed self-evident that a country had to have a "national airline." My first-ever flight was in 1998, from Delhi to Mumbai on the former Indian Airlines. I was 18, and just the giddy rush of being airborne for the first time made me look past any problems that my co-passengers might have noticed. The last time I flew Air India, though, in January 2012, I felt differently. Checking in took ages, it was clear that the airline was massively overstaffed and inefficient, not a word of apology was offered for the flight (predictably) being late, the air hostesses did a nice line in grumpiness bordering on contempt, and -- well before takeoff -- I'd decided that I'd had enough, both as taxpayer and consumer, of socialism in the skies. (Chandrahas Choudhury, a novelist, is the New Delhi correspondent for World View. Follow him on Twitter @Hashestweets. The opinions expressed are his own.) To contact the author of this blog post: Chandrahas Choudhury at Chandrahas.choudhury@gmail.com To contact the editor responsible for this post: Max Berley at mberley@bloomberg.net
2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

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