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Vision gone sour
RECENT REPORTS ON the domestic civil aviation industry are interrelated and can alter its dynamics fundamentally. The proposal to increase the cap on foreign direct investment in the sector and the more radical move to permit equity tieups with foreign airlines are pragmatic, even if they can be viewed as an immediate reaction to the failed attempts to divest the country's international carrier, Air India. Indian Airlines too does not have a suitor. Both the Government-owned airlines have suffered because of a convoluted civil aviation policy, bad management and competition. Privatising the airlines was considered to be the only way to restore them to their former health. But it was also realised that handing over the airlines to the private sector was not going to be easy, certainly more controversial than even that of say Balco. Political and trade union posturing was always there as an inhibiting factor. Government interference in the day-to-day running of the two airlines is an acknowledged fact. The Michael Mascarenhas affair, in which a chief executive of the airline was suspended and proceeded against criminally only to be exonerated in the last week before his retirement, shows the extent to which professional management has been discounted.
Coming on top of all those has been the sharp deterioration in the fortunes of the global aviation industry after September 11. Citing that very reason, the house of Tatas which remained the sole bidder for Air India backed out very recently. The Tatas have had a more than ordinary attachment to the Indian aviation industry, having started and nurtured Air India in the pre-nationalisation period. Until recently, they remained steadfast in their bid, going past the many processes of the disinvestment programme even when many rival bidders backed out or were blacklisted. In early September, when their consortium partner Singapore Airlines (SIA) exited, citing a variety of reasons, it was clear that Air India's privatisation like that of Indian Airlines earlier was going nowhere. The latest announcement by the Tatas is therefore not surprising at all.
For the Government, there is no option but to nurture its airlines for a considerably longer period. Changes proposed in the aviation policy are both overdue and inevitable. However, even when implemented they may not benefit the two Government-owned airlines immediately while the few private airlines offering domestic services stand to gain. Offering a 49 per cent stake looks attractive but the majority owner will still be the Government. The message here is that a massive restructuring to restore their commercial viability should be a precondition for the inevitable financial infusion. Thereafter, their autonomy must be clearly defined and protected. These issues are relevant for all public sector units but especially vital for the two airlines in the present context. Hopefully, the new policy measures when announced will clarify issues such as those relating to tieups between foreign and domestic airlines. Those have been among the most opaque parts of the existing civil aviation policy.
The global aviation scenario, dismal as it is, does give Indian policy-makers food for thought. Once high-flying mighty airlines in the U.S. and across the globe have floundered into bankruptcy. The Governments everywhere are bailing them out. A typical boom or bust industry, the civil aviation sector will take time to revive notwithstanding the generous support from many Governments. Consolidation of airlines will gather pace. Deregulation, an open skies policy and so on will have much less appeal when public money is staked. In India, privatisation issues have taken a backseat for now. Tremendous vision and effort are still needed to make them attractive enough for overseas investors and technical partners.
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