Privatisation of Air India

The increased demand for air travel in India has prompted the creation of a strong ecosystem and supportive government regulations.

Regarding financial development opportunities, India currently has one of the most notable development rates in common avionics. It ranks among the nations with the most elevated predicted development levels in both common aeronautics and cargo. Air traffic in India is expected to increase 3.3 times during the next 20 years. Regardless of these encouraging results, the government of India’s national carrier, Air India, remained as a disaster waiting to happen.

The government intends to bring flying to the masses by improving affordability and connectivity under the National Civil Aviation Policy 2016 (NCAP). It encourages ease of doing business, deregulation, streamlined procedures, and e-governance.

Air India’s Journey

JRDTata launched the first airline, Air India, in 1932. It was then known as Tata Airlines. The services began with connections between Karachi, Ahmadabad, Madras, Bombay, and Bellary. In 1946, it became a publicly-traded company under the name Air India. The government purchased a 40% interest in Air India in 1948. The government passed the Air Corporation Act in 1953. This act aimed to nationalise all existing airlines, including Air India. However, on the advice of the sitting committee chaired by Pramod Mahajan, this Act was defeated in 1993. 

The Demise of Air India

Until the 1990s, the carrier enjoyed a large piece of the pie, after which the government opened the market to private companies, causing Air India to turn into a loss-making entity. Air India operates over 370 routes, 9 of which are profitable. The shooting cost of fuel has resulted in greater working expenditures, which have disintegrated income.

Air India introduced aircraft in the private sector that are more viable in terms of ticket estimating, dynamic, choosing the ideal courses, delivering value-added services, and so on. The most compelling reason for its downfall is an inappropriate merger with Indian Airlines in 2007, which resulted in a staggering loss of Rs. 7000 crores in 2010–11. Another key reason for the disasters is that the number of employees is excessive in comparison to industry standards. Air India requires 12,000 personnel while having 30,000 representatives. Each of these factors contributed to Air India’s demise.

The Economic Impact of Air India

Because the government has failed to chart a suitable course, Air India will continue to spend enormous capital, and the government will have to close it at a loss one day. According to a recent CAPA analysis, the airline has received a $4.5 billion subsidy since 2012. It was later anticipated that if the government had kept its stake, it would have resulted in a $1.5 to $2 billion loss over the next two fiscal years. This airline needed to be privatised. The government was spending a lot of public funds.

Government Initiatives

 Some of the government’s major efforts are as follows:

• The Ministry of Civil Aviation (MoCA) has declared that the airlines will be able to operate domestic flights with no capacity restrictions
• The government reduced the customs duty on components or parts, including engines, used in the manufacture of aircraft by public sector units of the Ministry of Defence from 2.5 percent to 0 percent in the Union Budget 2021-22
• The Indian government enlarged the scope of “Krishi Udaan” in conjunction with Operation Green Scheme, wherein an air freight subsidy of 50% for agri-perishables would be offered to the North-Eastern states and four Himalayan states/UTs. The increased product coverage will benefit the “Krishi Udaan” plan and improve air cargo transit from these states
• The Regional Connectivity Scheme (RCS) has begun
• Mr Jyotiraditya M. Scindia, Minister of Civil Aviation, has requested collaboration between the Central and State Governments in order to establish 16 new airports in Maharashtra, Uttar Pradesh, Chhattisgarh, Rajasthan, and Madhya Pradesh.

The Indian Aviation Sector 

In the previous three years, India’s civil aviation industry has emerged as one of the fastest expanding in the country. India has surpassed the United Kingdom to become the world’s third-largest domestic aviation market, and it is anticipated to overtake it as the third-largest air passenger market as well.

The Indian aviation sector is scheduled to receive ₹35,000 crores (US $5.99 billion) in investment in the next four years. By 2026, the Indian government intends to invest $1.83 billion in airport infrastructure and aviation navigation services.

Conclusion

Reform is a method, not an explosion. It is something that must be done, and it must not be ignored at any cost. Change is unavoidable in all aspects of society, particularly in Asia’s non-industrial nations. Since nothing is permanent except change, Strategy-making groups should address changing the business climate and establish ground principles for it. One hopes that this time the disinvestment approach is deliberate, sought after, and effective because it is linked to the possibility of transforming Air India into a hearty transporter.