Air India On The Verge Of Collapse, Can’t Even Replace Engines On Grounded Planes

Air India hasn’t made payroll for December yet. The airline has an Airbus narrowbody grounded because it needs an engine replacement. The airline owns the engine. It can’t afford to send the engine to where the plane is.

One of AI’s Airbus has been grounded in Vadodara for almost a week as its requires engine replacement. The Maharaja has a spare engine for this single aisle aircraft in Delhi but is unable to send it as it can’t raise the e-way bill because of GST dues. “Our GST dues are about Rs 100 crore and because of that the paperwork required to send the engine to Vadodara is not being done.

Naturally since this is India the challenge Air India facings is both financial and about paperwork, and the government-owned airline can’t fix the government-owned plane because of money it owes to… the government. Which of course makes the government financially worse off, absorbing a grounded plane that cannot earn revenue.

The carrier plans to use forward ticket sales to pay back wages and the taxes necessary to move the engine and fix the aircraft. That leaves them without revenue, of course, to operate schedules in the future for which they’ve sold those tickets.

The government of India is trying to sell off money losing and deeply indebted Air India. They’ve said that if they cannot find a buyer there will be no further subsidies and the carrier would have to shut down in June. I’m skeptical that would happen.


Air India Boeing 777-200LR, Copyright: boarding1now / 123RF Stock Photo

Most likely the government finds a buyer of the ‘good assets’ while absorbing the carrier’s debt. Failing that in any game of chicken I believe the government would blink and extend further funds to the struggling flag carrier.

Indeed, with the expectation that the airline could go under if privatization isn’t successful and additional subsidies aren’t forthcoming ticket sales have dropped. That makes the airline less attractive to private buyers, and makes a shut down more likely. So the government is already hinting at more subsidies.

What’s more, the government assures that the airline has ‘inner strength’.

Inner strength though has been insufficient to finance new engines the airline doesn’t have in stock, which has caused them to ground 12 other Airbus narrowbodies.

Here’s what it’s like flying Air India when they don’t spend money to fix the air conditioning.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Good riddance. Hopefully it shuts down so Indian taxpayers won’t have to foot the bill for more government corruption.

  2. There really aren’t that many carriers I absolutely refuse to fly. PIA is at the top of the list but AIr India certainly warrants Honorable Mention 🙂

  3. I’m disappointed you didn’t include that hilarious Air India commercial in this post. Whenever I see VFTW headline about Air India, I quickly click on it in hopes of re-watching that “It’s the warmth, the care, the thoughtfulness” commercial with excessive voice dubbing.

  4. This is the fundamental challenge of state-owned “Flag Carriers”. They’re required to operate unprofitable routes as a show of national pride and they’re required to provide discounted or free services to the government that owns them, but then the governments balk at actually having to put forward monies to support them and cash flow issues are blamed on “economic forces” or “poor management”.

    Either let them operate (and succeed or fail) as a business, free to make business decisions, or operate them as a government service, freed from the burden of operating profitably.

  5. air India is another DUMPSTER Fire almost in the same leagues as Alitalia. Some of these Carriers have so many Issues financially One has to wonder How Safe they Are Operationally or have they been lucky to not have an incident/accident? I know that I would Never consider them and these are two carriers that are on Our Corporate No FLY LIST under any circumstance.

  6. Every government had a dream of selling it with 49% ownership, the talented ministers and IAS officers can not and don’t want to understand that unless the investor has majority ownership he not bring any operational, strategic decision essential to survive. A lot of flab needs to be trimmed and people must be sent home, for that there can not be any baggage of previous loan. In the present social turmoil this govt has no guts to take any bold decision ” the ministers keep talking”, the buyer must have confidence that the money he puts in would reap rewards and not the reverse.. We are after all Indians we will keep on weeping about the taxpayers money going down the drain ,and still the Maharaja will be flying…..We have no public accountability ,democracy in india sucks.

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