Financially troubled Air India tells the Indian government it will no longer issue flight tickets on credit. That’s because the Indian government already owes the airline millions of dollars in unpaid flights. However, the policy has a few exceptions…
According to Live and Lets Fly, the Indian government has a combined balance due of Rs 268 crore. This is the equivalent of $37.6 million USD. Ultimately, until this balance is paid, Air India will no longer issue tickets to government agencies that owe more than Rs 10 lakh – the equivalent of $14,000 USD. Here’s what an airline official had to say to an Indian newspaper:
“Those with more than Rs 10 lakh in quota have been put on ‘cash and carry’ in recent weeks. They are issued tickets only if they pay in advance.” – Air India
Blacklist and exceptions
According to the Times of India, there are several agencies clearly on the blacklist. These include:
- The Intelligence Bureau (IB)
- Central Bureau of Investigation (CBI)
- Direction of execution
- Customs Commissioners
- Controllers of defense accounts
- Border Security Force
- and more…
However, there are a number of government bodies that are exempt from this policy. They include:
- The Airports Authority of India (AAI),
- Ministry of Civil Aviation (MoCA)
- Lok Sabha (the Indian equivalent of a House of Commons or Congress)
- and the Labor Commission
These groups are still allowed to have tickets in credit. In addition, the Times of India states that these exceptions were made in the name of goodwill, without wanting to upset the authorities who have the most influence on the survival of the airline.
In addition, Live and Lets Fly notes that this move comes after the airline has already issued several reminders to government agencies for payment. However, these were ignored.
On the verge of collapse?
In all, Air India has yet to return a profit in the 12 years it has been operating, making it very difficult to find a buyer. In addition, the airline currently has a debt of $11 billion, which has forced the Indian government to reconsider whether it is an asset worth keeping.
On December 12, the Indian government announced that it will sell its stake in Air India. The move was called “strategic divestment”:
“It is not feasible for the government to continue operating a loss-making airline like Air India, pouring in taxpayers’ money even as the carrier’s accumulated losses increase with each passing year. As things stand , it seems this airline can never make money under government control. The only option is to privatize the airline or close up shop.” – An anonymous aviation consultant based in New Delhi via LiveMint
All in all, I think this is a prudent move for Air India. It is really shocking that Indian government agencies are not paying what is owed to the airline. On the positive side, Business Today reports that the airline has already recovered about Rs 50 crore ($7m USD) in the past few weeks. Moves like this should also make the airline more attractive to future private investors as it shows proper management.
Are you in favor of this move? Do you think there will be repercussions from the government on this policy? Let us know in the comments!