The Indian government has committed $5.85 Billion through 2020 to Air India to keep the airline afloat.  Much of the initial infusion of cash will towards settling debts with oil companies that are  threatening the airline.  This deal is termed a restructuring and it does see some employees being spun off into other companies but this is hardly a solution to an airline for which there is no practical answer.

Air India is a mess.  It’s a political and operational mess.  It’s the flag airline and therefore is subsidized in ways that few airlines see today.  It is a jobs program that keeps hundreds of people employed who have no real contribution to make to the company.  And this restructuring doesn’t really fix that.

Politically, no one is going to force Air India to lay-off thousands of employees.  It simply won’t happen.  Flights to international destinations won’t be rationalized as those flights are viewed as status symbols far more than as revenue earners.

And it won’t get done because the airline is government owned.  A privately owned company would have made these changes 5 years ago and, perhaps, might be seeing daylight by today.

Until market forces are permitted to move and influence the needs of India in the airline industry, I think we’ll see failing airlines who are unable to compete with a fully subsidized state airline despite serving a country of 1 Billion people.  There is absolutely no sign whatsoever that India is prepared to deal with this as well as other economic issues.  The country is to politicized to make such hard decisions.

If anything, I would, at this point, predict that we’ll see waning traffic to and from India, low yields on flights that do exist and no airline alliances with any of Indian airlines in the foreseeable future.

Filed under: Airline News by ajax