04 September 2009

Government Moves To Protect Air India

Analysis by Gerson Lehrman Group

It was almost as inevitable as Airbus getting money for its begging bowl that the Indian Government would relent and provide a much needed cash injection into the struggling national carrier, Air India, to show it is committed to looking after its own assets first rather than placate the whims of a beer-baron that doesn’t know how to run an airline.

Air India is not just a mascot that has represented the less than one percent of the Indian populace that is able to travel by air - it is a strategic national asset on par with its nuclear energy and weapons programs.

Given the red tape, apathy, bureaucracy and corruption that is rife within Air India, the cash infusion is not without some strings attached - that much was expected.

The irony of course is that while Air India makes moves to drop routes, cut costs and start a turnaround plan, Kingfisher Airlines is now sweating on approval for flights to London from Delhi.

Even if granted, the debt burden Kingfisher has is-eye watering.

It may have secured agreement to raise a paltry $100m shows that it just cannot and will not be able to compete with the more frugal Jet Airways let alone take on the Goliath in the state-backed national airline.

Air India, like Airbus, is a jobs club.

The potential for a political fall-out in not backing the airline during this most challenging time would have meant almost certainly that it would have folded.

Look no further than the European failure in Alitalia for evidence of that - then look at the aid Air France has swallowed too, however it has made the most of the cash injections to survive and become one of the biggest airlines on Earth.

That’s what Air India wants to emulate - and no sideshow by a bunch of amateurs at a brewery will stifle that goal - the Indian Government will not stand idly by and do nothing.

Air India ranks far and away more important than an also-ran airline that indulges in more air show champagne than it does the coffee of the real world.

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