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In A Tailspin

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The penny should drop but amazingly, its not. India’s national airline Air-India is now hemorrhaging deeply. Salaries are behind by several months and there is no strategy in place, at least one that will fly. The latest blow is that Star Alliance, a global network of airlines catering to frequent international travelers, has suspended Air India’s pending membership.


Reports say a membership in the Alliance would have brought it a 9% to 15% increase in revenues. Joining the Alliance would have meant meeting some 80 conditions, from computer integration to safety standards, a report in the New York Times said. “Air India has not met the minimum joining conditions that were contractually agreed in December 2007,” Star Alliance said. This was only another nail in the proverbial coffin.


Infusion Or Transfusion


Accumulated (estimated) losses are Rs 20,320 crore ($4.5 bn) while total debt is a staggering Rs 46,950 crore ($10.4 bn). If you want to add that up, its Rs 67,270 crore ($14.9 bn). Annual revenues are only around Rs 13,000 crore ($2.8 bn). This is not a national carrier but a national drain. Instead of an action plan which would see asset rationalisation, the Indian Prime Minister Manmohan Singh has announced a Rs 500 crore infusion.


This comes weeks after the Government itself announced austerity measures that specifically caution (though do not prohibit) such funding to public sector corporations. Bottom line: a failing airline should not be permitted to have a call on the public purse.

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