Air India, and its subsidiary AI Express, which together own 94 aircrafts and serve over 100 domestic destinations and 60 international destinations, have been sold to the Tata Group.
The Tatas have won the bid by offering as little as Rs. 18,000 crore (about US$ 2.2 billion). They are required to pay 15 percent of this amount, Rs. 2700 crore, to the Government of India. The remaining Rs. 15,300 crores will be towards clearing the outstanding loans of Air India, which are about Rs. 60,000 crores. The Government of India will bear the rest of Air India’s loan liability.
The corporate media is reporting this deal as if the Tatas are doing a great favour to the country by taking over Air India. This is a totally false impression which is being spread to cover up the truth.
The truth is that an extremely valuable public asset has been sold cheaply to benefit the Tatas. The net assets of Air India, according to its accounts as on 31st March 2020, were worth Rs. 46,000 crores. The actual value of physical assets, along with all the valuable landing and parking rights within the country and abroad, is many times more.
Air India has 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas. Busy international airports the world over have no new landing and parking slots due to which a new airline cannot fly to such airports. Getting access to these slots immediately extends the market share of the Tatas, both in India and on the global scale.
The Tata group currently operates two airlines in the country. One is Vistara, a joint venture with Singapore Airlines. The other is Air Asia, a joint venture with AirAsia of Malaysia. Tatas are the majority shareholders in both companies. The scale of operations of these two airlines is small compared to Air India. They together account for less than 15 percent of the domestic market and a negligible share of the international market. The acquisition of Air India and AI Express will catapult the Tata Group into the top position among all Indian airlines.
The BJP-led government is acting as if it has achieved something great, which previous governments tried but failed. All previous attempts of the sale of Air India were made to fail by capitalist monopolies, until the central government agreed to sell it at the terms dictated by them. The sale package envisaged now is of 100% shares owned by the Government of India in Air India and AI Express. The package also includes the sale of half of the government’s shares in Air India SATS Airport Services Private Ltd, a 50:50 joint venture with Singapore Airport Terminal Services Limited.
The attempts to privatise Air India began in 2000. They were temporarily shelved in the face of strong opposition from the workers’ unions. The plan to privatise Air India was reactivated in May 2017 when the NITI Aayog submitted a report recommending its strategic sale. In March 2018, the BJP-led government headed by Narendra Modi invited bids for purchasing 76 percent of government shares in the airline. The private buyer was required to absorb Rs. 49,000 crores of outstanding loans. No capitalist group showed interest in buying Air India under those terms. They did not want the government to retain any share of its ownership. They wanted the government to absorb the bulk of outstanding loans.
The central government agreed to the demands of the monopoly capitalists and invited bids in Jan 2020 for purchasing 100 percent of the state-owned airline, including Air India’s 100 percent shareholding in AI Express Ltd and 50 percent in Air India SATS Airport Services Private Ltd. The amount of the loan to be absorbed by the buyer was reduced to Rs. 23,286 crores. This was the loan amount pending against the purchase of aircrafts. All the rest of the debt would remain with the government.
Indian and foreign monopoly capitalists still showed no interest in buying Air India. They wanted more concessions. In October 2020, the government changed the bidding condition by removing the requirement to absorb a pre-determined amount of loan. The bidders were asked to quote the enterprise value after considering all the liabilities.
The government has selected the present time to sell Air India because it is a very favourable time for the monopoly capitalists. Since Jan 2020, airline business all over the world has been severely hit by the travel restrictions imposed due to the Corona Virus pandemic. Most airports and airlines had to suspend their operations and incur very heavy losses. There has been a huge jump in the losses of Air India, too. Consequently, it is a time when private bidders can lower their offers far below the level during normal times.
To make sure that Air India got sold this time, the Government of India did not even set a firm minimum reserve price before inviting bids. It decided the reserve price after receiving the bids. It is reported that the reserve price was set as low as Rs.12,900 crore.
The absurdly low reserve price is being justified by the government by pointing to the high accumulated losses and outstanding loans of Air India. However, the accumulated losses are entirely due to the government’s own actions aimed at wrecking this public enterprise. In 2005, Indian Airlines was made to order 43 new aircrafts, much above its requirement. In the following year, a huge loan of Rs. 50,000 crore was arranged to finance Air India’s purchase of 68 aircrafts, when the actual requirement was only for 28 aircrafts. The annual interest and principal repayment of these loans turned both the profitable airlines into loss-making companies.
Around the same time (2004-2005), the government was going ahead with giving away the most lucrative international routes and slots of Air India — particularly the Gulf routes — to private and foreign airlines.
The financial performance of the airline worsened when the government forced the merger of Air India and Indian Airlines in 2006, in spite of the united opposition of all the workers employed. Indian Airlines was a market leader at the time, with 42 percent share of the domestic market for air travel. The merger was meant to weaken the public company, for the benefit of the private airline companies. Indian Airlines used to get 40 percent of its revenues from the Gulf routes. This was reduced to 10 percent.
B. Kadian, general secretary of the Air Corporation Employees Union expressed the views of Air India workers when he said, “The merger of Indian Airlines and Air India was the last nail in the coffin”; and that “the only way to promote private players was to make sure that the very name of Indian Airlines disappears from the map of Indian skies.”
The merger crippled both the airlines. In 2007, the very first year following the merger, the company suffered a loss of Rs. 10,000 crores. While private airlines fully benefited from the crippling of Air India and gained in market share, the worsening finances of Air India was used to justify its privatisation at any cost.
With the privatisation of Air India and the consequent complete withdrawal of the state from civil aviation, air fares will be set solely with the aim of private profit maximisation. Social objectives such as ensuring connectivity to remote areas will not even be considered. Those places where flights are not usually full will experience a steeper rise in air ticket prices. Private airlines have already been accused of forming cartels and engaging in monopoly pricing. In 2018, IndiGo, Jet Airways and SpiceJet all were fined by the Competition Commission of India for forming a cartel to hike up the fuel surcharge rate.
The wrecking and privatisation of Air India and Indian Airlines has been carried out at the instance of the biggest Indian and foreign monopoly capitalists, so as to fulfil their greed for maximum profits. Workers will face greater job insecurity. Air passengers will face higher prices. The people as a whole will pay a very heavy price as public money is used to clear the huge debt.