Air India slashes fares as government refuses bailout plea

National airline, Air India, followed lead of its two private sector competitors Jet Airways and Kingfisher, and today, slashed its basic air fares in the domestic sectors ranging from 35 per cent to 82 per cent as per PTI.

The fare cut was effective from 1500 hours today, an Air India spokesperson said.

The maximum reduction in fares was 82 per cent on the Chennai-Bangalore route, while on Mumbai-Kolkata route, the reduction would be 35 per cent, Air India said. The basic fare for travel between Mumbai and Delhi now stands reduced by 49 per cent.

While Jet Airways and Air India have revealed their cards in terms of reductions, Kingfisher is yet to take a decision on the quantum of the cut, having only announced a reduction.

In other related developments, civil aviation minister Mr. Praful Patel has just released a bombshell. Apparently the government has decided not to bail out Air India. As per an article in Travel Biz Monitor,

The Central government yesterday ruled out any bailout package for National Aviation Company of India Ltd (NACIL), which runs the country's flagship carrier Air India, but said it could be given the benefit of duty cuts, said an IANS report. “The government will not provide any bailout package for NACIL. There will not be any direct financial assistance, but help in other forms like reducing duties is being done,” said Minister of Civil Aviation Praful Patel, on the sidelines of the foundation stone-laying ceremony of the Kolkata Airport upgrade in the city. NACIL recently projected a loss of Rs.21.56 billion for the current fiscal.

The Company had sought a bailout package of Rs 23.5 billion to help it tide over the shortfall. The airline is also in a financial squeeze due its ambitious plans to upgrade its fleet with an investment of Rs 440-billion with a limited equity base of Rs 1.45 billion. Faced with the acute funds crunch, NACIL approached the Ministry of Civil Aviation with a proposal for equity infusion of Rs 13.5 billion and Rs ten billion as soft loan

I find this hard to accept. Air India owes money by the bucket load to airport operators and oil companies, and to other vendors. By the minister's own admissions on the floor of the Parliament, Air India is by far the biggest defaulter to airport operators. Without the bailout package, there is no way on God's green Earth that Air India can pay back its creditors.

It appears this is going to become another case of passing on Air India's burden to the state owned Airports Authority of India, and to the oil companies ?

The government cannot have it both ways. Either it should stop interfering in Air India operations and sell off the airline, or then play the role of sugar-daddy.