Thursday, September 18, 2014

National Airlines: Air India has plenty of company

Air India is not the only national airline being kept afloat by government money. There are plenty of others around the world, the Economist reports- and the ill-fated Malaysian Airlines is not the only one. Poland's national airline received $200 mn from the government. Italy's carrier, Alitalia, was bailed out by recently Etihad, the Gulf airline, taking a 49% stake. Indeed, national airlines that are doing well are exceptions:
The thriving airlines of Singapore and Ethiopia, and the Gulf carriers, Etihad, Emirates and Qatar Airways, all benefited from government money but have been allowed to operate as commercial enterprises with minimal interference. Such entrepreneurial thrust is rare. Elsewhere, inexperienced cronies often dominate management. State employees frequently travel free. Many carriers are obliged to maintain loss-making domestic routes to please politicians. Olympic Airlines was forced to deliver newspapers for a pittance to keep the country’s press barons happy. The Greek national carrier went to the wall in 2009.

The reasons for national airlines doing badly are common: overstaffing, poor management and strong unions. Air India, I would imagine, is in a slightly different category. Its financial problems are because of excess debt incurred by an aircraft-buying binge during the tenure of Praful Patel as civil aviation minister. The problem is not overstaffing or operational inefficiency. 

No comments: