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Only three Air India routes make money: Ajit Singh
Air India has no idea where all its property is. We have an office in Milan and we have not flown there for 20 years, says Civil Aviation Minister Ajit Singh to Business Standard.
At a time when the aviation industry is going through turbulent times and multiple issues, the government is trying to put Air India back on track.
In a freewheeling hour-long interview, Ajit Singh talks to Surajeet Dasgupta and Disha Kanwar on a range of issues confronting the aviation sector.
Edited excerpts:
Many airlines have said there should be incentives for efficient ones, so that they can do better.
Are you saying that in a free enterprise system, the government should decide who is doing better and make it better and kill the weak one? We cannot. An airline doing well today might well be the loser next year and another one may come up. Some companies will fail and some will prosper. Our job is to provide equal plane ground.
Fares have gone up by 30 per cent in the first quarter of this year. Are you going to intervene?
The government has no intention of regulating fares. The problem in this is that there are several unanswered questions. We don't even know the variable and fixed components, why different operators are charging differently. We have also set up a committee and they have given their report. We should collect data on prices and make it public. That should put pressure on airlines.
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Only three Air India routes make money: Ajit Singh
Despite permitting import of ATF (aviation turbine fuel), no airline has been practically able to import it directly. What are you doing on this?
We have written to the petroleum minister to make ATF a notified commodity. The price of ATF is decided by oil companies in India, which is not transparent. ATF is not a notified product, so they don't have to tell you how they arrived at this price.
Once it is notified, PNGRB (Petroleum and Natural Gas Regulatory Board) would be able to regulate it. Then we will have the data. I will give you one example. Delhi airport charges 20 per cent ATF tax and Mumbai has 25 per cent.
The fuel off-take in Delhi is almost twice as much as in Mumbai, despite the number of flights being the same. If the sales tax is reduced, that is also a great boost to the area.
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Only three Air India routes make money: Ajit Singh
What is the progress on allowing foreign airlines to invest in Indian skies?
FDI (foreign direct investment) will come only if we get consensus among all the allies (in the ruling coalition) and if we allow them. We are definitely in financial stress.
But FDI would be coming for other reasons - the growth we have, the potential we have, a growing middle class, traffic rights and the strategic geographical position. It is basically an enabling legislation and it is up to the airlines.
How are you working for the turnaround of Air India in the wake of the pilots strike and the financial problems it is mired in? How will you cut costs?
On many routes, we don't even meet the operations cost. Of 300 routes, only three make money. AI does not even have the correct data. They are not following simple common-sensical things.
Up to two months earlier, their pilot assignment was being done by a few senior pilots; we have now computerised it. Last year, we paid Rs 141 crore (Rs 1.41 billion) for hotel bills and Rs 11 crore (Rs 110 million) for taxi bills. We are redefining 'family' for (free) tickets; it now includes daughters, sons, in-laws. Even after retirement, you enjoy the benefits.
We have also decided that the salary structure will be redone - we will put half of the productivity linked incentive part into salaries and the rest will be paid only after the airlines make profits.
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Only three Air India routes make money: Ajit Singh
You are also looking at monetising real estate and all that. How much work has been done?
AI has no idea where all its property is. We have an office in Milan and we have not flown there for 20 years. All over the world, we have paintings and land like that. A committee has been set up and in two months, we will have a complete list and evaluation. We have Rs 350 crore (Rs 3.5 billion) worth of paintings but nobody has done the valuation of real estate but estimates vary from Rs 5,000 to Rs 10,000 crore (Rs 50 billion to Rs 100 billion).
Do you think a VRS (Voluntary Retirement Scheme) for Air India would work?
It is going to be difficult but we are trying our best. A ground handling staffer gets Rs 50,000 a month, so why and where will he go?
Are you looking at giving more powers to DGCA (the sector regulator)?
We understand that DGCA needs some independence in hiring and in their authority to check the safety aspect. We are bringing in a Civil Aviation Authority Bill for that.
Your policy of making India into a hub seems on paper. Practically, nothing is happening.
To make a hub here, we have to make sure what we have to do about bilateral traffic rights and we have made a new policy. We are asking (foreign carriers) them for their next three and a half year projections.
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Only three Air India routes make money: Ajit Singh
Only when we have exhausted our own rights will we start negotiating for more. If we have to make a hub, we need feeder airlines, connectivity, airports at tier-three and tier-four cities. You can't have these big planes; we need ATR, Bombardier, 98-seaters, 48-seaters. That entails extra costs.
They have one set of spares, inventory and one kind of mechanics, and once you add different kinds of planes, their costs go up and airlines are very reluctant to that.
We have given licences to so many regional airlines but hardly anyone has started. We are making that policy route-dispersal tied with the plane acquisition, so that balance can be maintained.
Are you looking at Kolkata and Chennai in PPP (public-private partnership) mode?
For that, first the CMs (chief ministers) have to agree and, second, Chennai has no extra land anyway, so cityside development is not there. It has already been constructed and they are also planning to build another airport.
A lot of questions have come about Kingfisher Airlines' financial condition and safety situation. Is the government thinking of any bailout? When an airline of that size goes, there is a mismatch between demand and supply and prices shoot up.
First thing, on safety there is no compromise. That is DGCA's function. Otherwise, the government can only close down an airline if there are less than five aircraft operational and less than Rs 5 crore (Rs 50 million) equity. Otherwise, we don't have the right.
Second,with one per cent less availability of seats, the fares don't go up proportionately. But let me be clear, that we are not going to give any bailout to KFA.
