Air India: Why are MPs hell bent on funding the white elephant with tax-payers' money?
The very purpose of resisting any disinvestment in Air India is that the politicians continue to get vast privileges while travelling aboard the state owned airline, never mind its precarious financial health
New Delhi: Members of Parliament are loath to give up the numerous entitlements bestowed by our great democracy. Not only do some of them feel entitled enough to assault airline staff for being denied Business Class travel on a short domestic flight, they remain unapologetic even in the face of severe criticism and instead threaten to sue the airline for denying them a seat subsequently. All because these MPs feel their station in life allows them privileges which lesser mortals, the aam aadmis, do not enjoy. And this sense of entitlement does not end with demanding various privileges at airports or on board the aircraft, it seems to extend to various other forms of travel too.
Why else would a parliamentary standing committee, comprising MPs, rue the fact that loss-making Air India be pumped in with more government funds? When it is amply clear that Air India’s turnaround is still on shaky ground and the government continues to throw good money after bad. Do the MPs want the airline to survive on taxpayers’ money so that their privileges while travelling by air continue? Private airlines are less likely to suffer their whims, after all.
Then, why will a bunch of MPs also go on to advocate repeatedly that the government fix air ticket prices in a free market and why would they single out Air India to complain about its catering? Remember, Air India has contracts with the same catering agencies that other full service airlines like Jet Airways and Vistara (which also offer complimentary meals) have and the airline has claimed in the past that it hardly gets any complaints about its catering. AI serves hot snacks on even one-hour flights!
These are three of the several suggestions that the Parliamentary Standing Committee on Tourism Transport and Culture has made in its 244th report submitted to Parliament recently.
Air India has suffered a loss of Rs 1,000 crore due to rupee depreciation and foreign exchange fluctuations, the report quotes the civil aviation secretary saying. Does this mean fears of Air India once again being unable to declare even an operational profit for FY17 would come true? The airline had claimed Rs 105 crore as operational profit for the first time in a decade in FY16, a figure which has subsequently been contested by the Comptroller & Auditor General (C&AG).
Minister of State for Civil Aviation Jayant Sinha told the Rajya Sabha on Tuesday that Air India is projected to post an operating profit of Rs 300 crore in the current fiscal. "The operating losses of the company have been steadily coming down over the past few years and the same have converted into operating profits," the minister said. In a written reply, he also said the carrier's net losses are also reducing gradually on account of the overall improvements in the "operational and financial performance".
It is still some years away from declaring a net profit even as its interest burden poses a serious challenge to the overall turnaround. In this scenario – when public money is being thrown down a black hole – the MPs’ suggestion for more funds for the airline seems bizarre. One, it is already taking funds on loan for various needs and adding another Rs 787 crore to the loan kitty wont materially change its interest burden and two, AI needs to start generating more internal resources through increased efficiencies instead of perennially depending on government dole.
“The reduction in equity infusion to the tune of Rs 787 crore will adversely affect the financial and operational performance of the company since it may be forced to take loans from banks and financial institutions at a higher interest rate to meet the short fall, which was not contemplated under the Financial Restructuring Plan, ” the panel said. Remember, the government has promised over Rs 42,000 crore infusion in AI till 2033, of which over Rs 24,000 crore has already been infused into this ailing airline. The Budget has now approved Rs 1,800 crore support to the airline for 2017-18 against Rs 2,587 crore as per the TAP.
The panel has repeated a demand often made by MPs in the past – that the government should regulate air fares, never mind the free market principles the domestic aviation industry operates on. For several years now, MPs have been complaining of exorbitant fares on certain sectors, seeking a price fixing mechanism – and airlines have been totally opposed to any such move since they plead flexi pricing works to flyers’ advantage too many times. While some sense in pricing during natural calamities, disasters and other emergencies is needed, there seems to little reason for fixing air fares. The panel has made several points about air fares:
a) Even after 50 percent reduction in prices of aviation turbine fuel over a period of time, the panel says airlines have not passed on the benefit of this price to consumers. Never mind the numerous discounts and sales that the airlines continue to do on the domestic sector. The committee has recommended that the Ministry of Civil Aviation should take “effective steps to ensure that the airlines pass on the benefit to the travelers by reducing the air fares”.
b) There are no existing rules which work in regulating airfares, the panel has noted, while asking the ministry to specify the limitations, legal and otherwise, which need to be amended or other measures to be put in place to tackle this problem. ”We are a developing country and many of the pricing mechanism applicable to the developed countries may not suit the Indian people and Indian conditions. The Ministry should consider fixing an upper limit for every sector, especially in the economy class of air fares.”
c) The panel has made a special case for Gulf routes, saying airfare from Kerala to the Gulf sector are “quite exorbitant” compared to the foreign carriers which are offering lesser fares. “Many of the travelers who are utilising the Gulf sectors are migrant labourers and their helplessness should not be exploited by the airlines. The Committee recommends that the Ministry of Civil Aviation and DGCA should intervene effectively to control the artificially created exorbitant prices in the Gulf Sector.” There is no explanation why flyers cannot book on the cheaper foreign carriers.
The MPs have a bone to pick with food aboard Air India flights too. “Many members of the Committee have complained that the catering services in Air India aircraft are not up to the mark and that they need improvement to attract more passengers. The committee notes that this is an oft repeated complaint which needs serious attention of the top management of Air India and Ministry of Civil Aviation.
The Committee urges upon the Ministry to evaluate the standards of the catering services in Air India flights and take necessary steps to improve the same.” Many MPs take private airline flights to their domestic destinations but not often does one hear them complaining about food served on these aircraft. Perhaps the very purpose of resisting any disinvestment in Air India is that the politicians continue to get vast privileges while travelling aboard the state owned airline, never mind its precarious financial health.
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