How fixing Air India can help India

India’s national carrier Air India, the brand that today encompasses both the erstwhile Indian Airlines and Air India, has posted a loss (Rs 5,547 crore) for the eighth successive year since its merger in March 2007.

The accumulated loss is now more than Rs 44,000 crore ($7.3 billion)–equal to India’s annual health budget–and borrowing has grown to more than Rs 38,000 crore ($6.3 billion), according to data compiled by IndiaSpend from the Department of Public Enterprises.

As the first part of this series explained, Air India accounts for 25% of the Rs 20,000-crore loss showed by 71 PSUs in 2013-14 (BSNL accounts for 35% of that loss, as the second part of this series detailed). If Air India’s losses can be stemmed, the Indian government will have more money to spend on everything from clinics to highways.

Analysts often cite reasons related to the post-merger era, including poor management, competition after aviation-sector liberalisation in 2004–after which its market share shrank from 50% to 17%–and a workforce that has grown 66% in 10 years.

But the downslide began before 2007. Between 1996 and 2006, Air India lost money in five of 10 years, and Indian Airlines in four. The accumulated loss of the companies when they merged was Rs 1,111 crore.

Air India