Financially struggling Air India is telling the Indian government that it will no longer issue flight tickets on credit. That’s because the Indian government already owes the airline millions of dollars in unpaid flights. However, the policy has a few exceptions…
According to Live and Lets Fly, the Indian government has a combined balance owing to Rs 268 crore. This is the equivalent of $37.6m USD. Ultimately, until this balance is paid off, Air India will no longer issue tickets to government agencies that owe more than Rs 10 lakh – the equivalent of $14,000 USD. This is what an airline official had to say to an Indian newspaper:
“Those with over Rs 10 lakh in dues have been put on ‘cash and carry’ in the past few weeks. They are issued tickets only if they pay upfront,” -Air India
Blacklist and exceptions
According to the Times of India, there are several agencies clearly on the blacklist. These include:
- The Intelligence Bureau (IB)
- Central Bureau of Investigation (CBI)
- Enforcement Directorate
- Customs Commissioners
- Controllers of Defence Accounts
- Border Security Force
- and more…
However, there are a handful of government bodies that are exempt from this policy. They include:
- The Airports Authority of India (AAI),
- Ministry of Civil Aviation (MoCA)
- Lok Sabha (the Indian equivalent of a House of Commons or Congress)
- and Labour Commission
These groups are still allowed to be issued tickets on credit. Moreover, The Times of India states that these exceptions have been made in the name of goodwill, not wanting to upset authorities that have more sway in the airline’s survivability.
In addition, Live and Lets Fly notes that this move comes after the airline has already issued several reminders to government agencies for payment. However, these have been ignored.
On the edge of collapse?
Altogether, Air India still hasn’t returned a profit in the 12 years it has been in operation, making it very hard to find a buyer. Furthermore, the airline currently sits in $11 billion of debt, which has forced the Indian government to reconsider whether it is an asset worth keeping.
On 12 December the Indian government announced it will be selling the entirety of its stake in Air India. The move has been called a “strategic disinvestment”:
“It is not feasible for the government to continue to operate a loss-making airline like Air India by infusing taxpayers’ money into it even as the carrier’s accumulated losses grow bigger with every passing year. As things stand, it seems that this airline can never make money under government control. The only options are to privatize the airline or shut shop.” – An anonymous New Delhi-based aviation consultant via LiveMint
Altogether, I think this is a prudent move for Air India. It’s actually quite shocking that Indian Government agencies would not pay what is owed to the airline. On the positive side, Business Today reports that the airline has already recovered around Rs 50 crore ($7m USD) in the past few weeks. Moves like this should nonetheless make the airline more attractive to prospective private investors as it shows proper management.
Are you in favor of this move? Do you think there will be any repercussions from the government over this policy? Let us know in the comments!