Air India Grounded : Mockery of Public Interests
Editor’s note – It is shocking to say the least. Read the excerpts below from The daylight rape of the public interest.This is in addition to the recent CAG report on the airline which severely reprimanded the Ministry for pushing ahead for purchase of aircraft and merger of Air India and Indian Airlines. The CAG’s observations can be downloaded from here
Please read and share it widely.
GFiles prayerfully brings to the Supreme Court’s attention..the inside story of how a national resource…has been systematically emasculated..(and) how, as part of a larger conspiracy, prime land worth Rs 98,000 crore belonging to the Government of India was gifted for profit to a consortium of vested interests in the name of “airport development”.
This is not a polemic or ideological argument for or against free enterprise or competition or modernization. In India’s growth story, these precepts carry intrinsic value. It is, rather, the shameful tale of how a Union Minister…has instead been a prime mover in what we can only describe as its plunder.
..based on documented verification – we have compiled..a comprehensive record of how Civil Aviation Minister Praful Patel – a former director of Jet Airways, with whose owner he still has cherished relations – first systematically bankrupted India’s national flagship carrier, Indian Airlines, and paved the way for Jet Airways to acquire primacy, and later approached the Government of India for a Rs 50 billion bailout from taxpayers’ money to keep afloat the very airline he had so tactfully destroyed.
Deliberate Destruction of a National Resource
THE destruction of Indian Airlines, as we will demonstrate, was craftily calibrated with the connivance of bureaucrats who are supposed to be the steel frame of protective governance..Indian Airlines, in a series of moves, was deprived of its revenue sources through unreasonable and unviable fleet expansion, budgeting, cutting off commercially viable international routes in the garb of “route rationalization”, unjustifiable leasing arrangements, quietly opening passages for foreign airlines on profitable sectors, siphoning off baggage handling activities to other conglomerates, and destroying the Indian Airlines brand by first obliterating its 50-year-old logo after renaming it “Indian” and then by merging it with the unviable Air India.
We back this conclusion with the following facts:
- Mr Patel, the former Jet Airways director-turned-politician, took oath as Civil Aviation Minister in May 2004… At that time Indian Airlines was earning a profit of Rs 65.61 crore…Four years later, on November 11, 2009, NACIL (the company formed after the merger of IA & AI) declared a post-tax loss of Rs 5,548.26 crore!
How the Damage was done
By Ramping up the pre-merger AI fleet acquisition plan from 24 to 68 aircraft to bankrupt the airline
- Air India’s original fleet plan was for 24 aircraft to be inducted over a five-year period. This was suddenly enhanced to 68 aircraft within a period of 24 weeks, with a change of aircraft from Airbus to Boeing, including induction of an aircraft that was still on the drawing board (the B787). The Ministry of Civil Aviation as well as Air India’s Board ignored the fact that they were burdening an airline that has a turnover of only Rs 7,000 crore per year with an aircraft order worth Rs 35,000 crore. Air India was expected to service a debt and interest repayment of Rs 6,000 crore annually for the purchase, an outgo of 86% of its annual turnover.
- Where then would the resources for essential expenditure come from? Why was the decision regarding such huge purchases taken even without a full business plan and informing the Cabinet? Who initiated this move? Why was there no inquiry into how Air India would bear the burden of these new aircraft?
- Why was the decision shifted from Airbus to Boeing (B787, which was at drawing board stage)?
This has never happened with any airlines in the world – placing an order for an untested aircraft
- Will Mr Patel inform the nation of any revenue plan for the induction of 68 Boeings? Can he deny that this is one of the main reasons that the airline is now reeling under a working capital deficit of Rs 15,000 crore?
Disproportionate access to/from India to Foreign airlines
- Between 2004 and 2009, the Ministry was very liberal in the exchange of bilateral entitlements with many countries. It is alleged that in order to support the international operation plans of Jet Airways and Kingfisher Airlines, entitlements far in excess of the actual traffic demand on many routes to/from India were exchanged with many countries. The increase in traffic entitlements benefited mainly foreign airlines, and they were quick to capitalize on the Indian air travel market, increasing their seats from around 35,000 to 90,000 per day over the past four years or so…Comparatively, on the Indian side, Air India and Indian Airlines could only marginally enhance capacity while Jet Airways deploys only 12,000 seats per day on international routes
- The revenue earning opportunity was thus skewed heavily in favour of foreign airlines, allowing privileged private Indian operators to fly international routes.
- Permission to private airlines to operate internationally was structured to favour Jet Airways.
- The permission to Indian private airlines to operate international operations was also structured in such a manner that it favoured Jet Airways. Criteria were decided such that, apart from Jet Airways, only Air Sahara (which Jet Airways eventually acquired) qualified to operate international services, keeping the other domestic airlines at bay for a period of 3-4 years. Also, the move to allow Jet Airways to operate international services was further supported by the Ministry of Civil Aviation, by granting capacity entitlements to operate flights to London. The processes were put in place in a great hurry to enable Jet Airways to commence operations to London just a few days prior to their IPO which made Jet Airways owner Naresh Goyal a richer man than he already was.
- The complicity was so blatant that Jet Airways applied for slots in Singapore and London within the first month of Mr Patel’s tenure at Rajiv Gandhi Bhavan (a fact reported in newspapers in June 2004) – a full six months prior to the Government of India announcing the change in policy, permitting private airlines to fly on international routes, in December 2004.
Creation of Air India Express – the biggest hoax in Indian aviation history
Mr Patel ensured that Air India set up a low-cost carrier to operate on the lucrative India-Gulf and India-Southeast Asia routes – routes that were well served by both Indian Airlines and Air India and were reportedly the most profitable ones for at least IA. Both Air India and Indian Airlines became losers: Air India because of ceding routes to Air India Express, with lesser revenues being earned as Air India Express operates on the low fare principle; while Indian Airlines lost overall revenues as it had to reduce fares to match Air India Express fares and other LCCs (Low Cost Carriers) such as Air Arabia that entered these markets.
The Minister must answer serious questions for the public:
- What was the logic in launching Air India Express?
- Air India Express was launched as a Low Cost Carrier on the standard LCC premises – only internet bookings, no meals, no agents and therefore no commissions. Yet it offers meals and even in-flight dutyfree, and sells through agents as well as consolidators very openly. It has a tie-up with the Minister’s friend, Mr Deepak Talwar. Who gave him the contract without tenders and proper bidding?
- How did Air India Express decide to lease the B737-800 without competitive bidding?
- Why is it that Air India Express operates – in most cases -flights at around the same timings as Air India on the same routes, at significantly lower fares? Isn’t Air India Express competing with its parent company?
- Has Air India Express ever achieved its projected aircraft utilization?
- How is it that there is only one person who is capable of being the COO of Air India Express and he gets an extension beyond retirement age when there is no dearth of able officers in Air India to take on the job?
- Air India Express has, however, served one key purpose – it enabled the lease of a number of B737-800 aircraft and also the expansion of Air India’s aircraft purchase plan to include 18 B737-800 aircraft for Air India Express. Air India Express also chose to induct B737-800 aircraft from Day 1 without following the normal aircraft selection process.8. Robbing AI and IA of their existing revenue streams from ground handling of other airlines and also from their then existing commercial agreements