28 Jan 11 Air India more important than aviation industry: More government meddling

air6Last week, the new Minister for Civil Aviation, Mr. Vyalar Ravi was widely quoted in the media as saying that his “top” priority was to ensure that Air India regains its “lost glory”. Anywhere else, such a statement would have drawn criticism for its partiality towards a single player. However, in India, public sector units are holy cows, and more important than the consumers they serve.

So the top priority is not ensuring lower fares, or better service for passengers, or more safety, or industry growth – but to make sure that one of the most bureaucratic, inefficient and customer unfriendly service providers makes money (or stops losing money!). All other concerns are subservient to keeping the powerful unions of Air India placated.

Consistent with this policy world view, some months back, the Ministry apparently asked private airlines to shut down their baggage handling activities, and outsource this to Air India.

Does this make any sense? Would you order all IT companies to buy computers from a single vendor? Would you order all farmers to buy fertilizers from a single supplier? Would you order all auto companies to buy tyres from a single manufacturer?

But then, not much of what this government does seems to make economic sense. Clearly, it is an attempt to re-create a little monopoly for Air India in the hope that this will help them return to profit.

But this is clearly wishful thinking. Despite decades of running monopoly businesses, Air India and Indian Airlines repeatedly made losses. Bloated salaries, over-staffing, militant unions, constant political interference and other such endemic sicknesses ensured that customers have gradually deserted the national carrier and taxpayers are footing the bill.

We’re still shelling out thousands of crores to keep Air India alive (or rather, to ensure lifetime employment to its pampered staff). Why?

If private airlines are to discontinue their own baggage handling operations, will this not mean layoffs? Are these people’s jobs less important than those of Air India staffers?

And finally, if I lose my bags due to a screw-up by a private airline, I’m pretty sure they will try their utmost to retrieve them – if not, I might never fly with them again. But will Air India care? Especially so, if they have a monopoly on baggage handling.

Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

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