Air India is heading into the new decade with its future uncertain. The Indian flag carrier is mired in an ongoing financial crisis, causing observers to ask if 2020 will be the year Air India goes out of business. It will hardly be the first airline to do so but it may well enjoy the rare distinction of being the first airline to do so in the 2020s.
Airline in a desperate fight for survival
Gary Leff is asking just that question in View From The Wing. He notes that Air India is surviving on government subsidies as the Indian Government (the airline’s owner) scrambles to find a buyer. Gary Leff cites an anonymous Air India official as saying that if a buyer isn’t found by June, the airline will be shut down.
We’ve been keeping an eye on Air India here at Simple Flying. Just before Christmas, I wrote about how the airline received yet another USD$73.7 million guarantee from the Indian Government whilst debt in excess of USD$8.5 billion was been shifted off the airline’s books.
You might think that would be enough to keep everyone involved busy for a week or two, but no. Last week, the airline told its owner that it would stop issuing airline tickets on credit to most Indian government agencies, primarily because these agencies aren’t so great at paying their monthly invoice. Allegedly, USD$37.6 million is owed – drop in the ocean in the wider scheme of things but every drop helps at Air India these days.
Last drinks on a sinking ship
At around the same time, the airline scraped together enough funds to pay its 1600 pilots their November flying allowances. These allowances were about three weeks overdue. And akin to drinking champagne on a sinking boat, Air India announced a new service between Mumbai and London Stansted from February. Stansted Airport wasn’t so bolshie though, saying the service wasn’t yet confirmed.
Whether Stansted Airport wants Air India as a customer is an open question. Several airports in India, perhaps with a better sense of what’s going on than their international counterparts, have stopped supplying fuel to Air India on credit, worried they won’t get paid after current invoices went past due.
Shutdown by June?
Over the last couple of days, first came the announcement Air India will shut down by June unless a buyer is found. According to another anonymous Air India official, the current ‘piecemeal’ funding arrangements are unsustainable. That tidbit was backed up the following day with an announcement by India’s Civil Aviation Minister, Hardeep Singh Puri, who said that Air India will keep on flying until it is privatised. He said;
“Air India is running. Air India will keep on running. But Air India has to be privatised because it is incurring a daily loss of Rs 20-26 crore. This is taxpayer’s money that can be more profitably spent.
We made an attempt (to offload Air India) two years ago. That attempt proved to be less than successful. We have learnt from that experience. It is our endeavour now that we will be issuing an expression of interest in the coming few weeks. Hopefully, sooner than later.”
The sale comes with strings
The Indian Government, its agencies and bureaucracies, have a well-earned reputation for inertia. There is no better example of the outcome than Air India in 2020.
Even if the Indian Government retains the airline’s debt, they are putting some pretty unattractive provisos on any sale, including preserving the jobs of the 9400 employees and 4200 contract workers. Hopefully, that doesn’t include the board and senior management who’s stewardship of Air India has been woeful.
Right now, given the way Air India is lurching from crisis to crisis, suggestions that the airline has a grace period through to mid-year should be taken with a grain of salt. The news coming out on the subject is changing almost daily. Unless a buyer is found soon, 2020 could well see the end of Air India. And sooner rather than later.