Flight Control

The history of civil aviation in India is littered with instances of business interests, monopolistic policies, political whims, bureaucratic privileges and capricious decisions ensuring the sector remained, despite its remarkable growth, hobbled by uncom­petitive and shady practices. While the story of ma­nipulation and sloth goes back several decades, it is useful to trace events after the 1991 liberalisation to fully consider the implications of the current robust acquisition plans of domestic airlines and the rising interest of foreign ones looking to add more and more Indian cities to their networks.

A proposal by the Tatas to start an airline in partnership with Singapore Airlines—which enjoys a well-deserved repu­tation for efficiency and quality—promised to revolutionise India’s air travel in the mid-1990s. The new airline would in­crease the number of aircraft and introduce greater choice for Indians who were beginning to see air travel as a more regular option. The file never moved from then Civil Aviation Minister CM Ibrahim’s desk. An influential minister in the HD Deve Gowda government, Ibrahim showed no interest in the proposal. In his memoirs, former Civil Aviation Secretary MK Kaw says the Tatas finally grew tired of waiting and withdrew their project. It was common knowledge that the Tata plan discomfited Jet Airways whose owner Naresh Goyal enjoyed considerable access in Delhi’s political circles. Many years later, Tata patriarch Ratan Tata hinted that his unhappy experience in dealing with a maze of interests was a reason to consider the need to hire an agency to counter mis­information. An incestuous network of officials, politicians and sections of the media came to light in a dramatic manner when a leading lobbyist’s telephone conversations became public in 2008.

The influence of various lobbies declined when the short-lived United Front (UF) government finally fell and a more stable Na­tional Democratic Alliance (NDA) coalition led by Atal Bihari Vajpayee assumed office in 1999 (after its earlier version lost a floor test by one vote) but did not disappear altogether. The officialdom for one retained a tenacious grip on policies and the running of the government-owned Air India and Indian Airlines. The state-owned airlines remained milch cows forced to put up with parasitic prac­tices like arbitrary upgrades and uncompetitive decisions even as they became increasingly plagued by self-serving unionism. The Vajpayee government did initiate significant privatisation but Air India and Indian Airlines proved tough nuts to crack. Later, controversies and cases over some of the disinvestments made successive governments cautious and the strategic sales option was more or less put away. Even during NDA’s tenure, there was an unwholesome political influence in the working of the airlines and tales of private operators, some of whom were in financial and legal trouble, seeking and being granted favours did the rounds. Meanwhile, Air India and Indian Airlines continued to become more and more unviable and debt-burdened.

The 2007 merger of Air India and Indian Airlines as a single entity put paid to any prospect of the airlines becoming viable. The poorly considered amalgamation resulted in an enormous enterprise of more than 30,000 employees with several overlapping roles. The purchase order of 111 aircraft, strongly criticised by the Comptroller and Auditor General (CAG), was marred by allega­tions of lobbying and the cost of the deals at `70,000 crore was seen to be financially ruinous. The decision to stop flying on profitable routes, ostensibly to rationalise operations, ended up benefitting private airlines which promptly stepped in to reap the benefits. Similarly, long-held slots at important international airports were relinquished, diminishing Air India’s services. The policy on leas­ing aircraft was perplexing as these contracts were not linked to delivery of new aircraft. The leases were extended, causing more losses even as new orders were concluded at higher prices with provisions to seek lower interest rates from aircraft manufactur­ers not utilised. Then Civil Aviation Minister Praful Patel later said decisions regarding the merger of Air India and Indian Airlines and the formation of a new entity had been cleared by the Cabinet. In­terestingly enough, A Raja, former communications minister, had responded somewhat similarly to allegations of manipulation in the allocation of 2G spectrum that became a major embarrassment for the United Progressive Alliance (UPA) government.

After a period of relatively inexpensive flight tickets in the mid-2000s, costs began to rise again. For one, the role of Air India-Indian Airlines in keeping travel costs under check diminished as a forced merger began to play havoc with finances and efficiency. The demand for air travel was rising and private players began to rake in profits as the sector did not expand as re­quired. The pace of development of airports lagged and this also began to take a toll. The process of airport privatisation became subject to controversy with the contracts for major cities seen as a balancing between com­peting entities rather than a genuine process of tendering and bidding. Complaints of high user costs and terms that favoured private firms took some of the sheen off the pri­vatisation though there was an improvement in basic pas­senger amenities when com­pared to the spare and bare look of most airports. The construction of new airports and efforts to privatise the running and maintenance of existing ones remained chal­lenging as the qualification criteria and policy guidelines were problematic. The argu­ments relating to the need of prior experience—or the lack of it—became points of con­tention. The bidding process under the current govern­ment has been targeted for allegedly favouring one corporate group. But the tendering has not been proved to be flawed and, most importantly, criteria relating to prior experience did not result in any cleaner deals in the past. Rather, they seemed to favour a select few.

In the first Modi government that took office in 2014, the genial Telugu Desam Party (TDP) leader Ashok Gajapathi Raju became civil aviation minister and while this marked a sea change from the untrammelled influence-pedalling that preceded him, reforms were slow to take off. Part of the reason was the unhurried nature of the new ministerial incumbent and also because sorting out the mess was not easy. TDP broke with NDA ahead of the 2019 Lok Sabha polls and since then the ministry has been stewarded by BJP leaders. Repeated efforts to push the disinvestment of Air India kept failing to fly with bidders not being enticed even as the government was forced to pump in equity. Monthly operational losses, the ministry told Parliament, had touched `250 crore. The airline was also running into problems as regards repairs and spare parts. In June 2018, the ministry reported that not a single entity had shown interest with just one day to go for bids to be sub­mitted. The Air India disinvestment was seen as a landmark pro­cess, one that would mark a decisive moment in the government’s privatisation policy. Fresh efforts had to wait as the Covid-19 pan­demic consumed the government’s attention and it was only in late 2021 that Tatas’ acquisition of the airlines was approved. It was a much-celebrated homecoming as the airline, set up by JRD Tata, had been nationalised decades ago. The financial pru­dence of the decision was discussed but with the recent Air India mega deal with Boeing and Airbus, the purchase and the disin­vestment decision are both fully vindicated.

The beginnings of private participation in India’s civil aviation sector were marked by reports of benami holdings and underworld finances. In some ways, the progress of capitalism elsewhere has not been dissimilar—the US highway and railroad construction in the 19th century gave rise to the term “robber barons”—but the success of some private airlines in maintaining their advan­tages through policy manipulation did not serve the interests of the consumer. In this interplay of vested interests, Air India and Indian Airlines were pawns who did the bidding of their politi­cal masters and helped inflate the profits of competitors. As Kaw noted in his book, demands for bribes, destruction of rival interests, mismanagement by officials, and free jaunts for influential people and their relatives were the order of the day. After he gave up on the Tata-Singapore airline deal, Ratan Tata noted that in most coun­tries debt-ridden firms died out or changed owners. In India they borrowed afresh and actively worked to thwart competitors. Some of that began to change with an overhaul of corporate law and dis­solution processes in 2015 that meant owners could not hold on to mismanaged businesses or return under another garb—nor could they depend on banks to evergreen their loans—raising the real possibility of losing proprietorship. The aviation sector regulators will continue to have their hands full, given the heavy weight of legacy issues and newer challenges. But 2023 marks a sea change from the situation when the open skies policy of 1990 heralded the tentative liberalisation of aviation in India.

About The Author

Rajeev Deshpande

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