DMPQ- AIR India is under severe crisis. What are the reasons for its failure although the number of passenger increased drastically in the last decade?

AIR India is facing a severe crisis and at every functional aspect the PSU is on downward side. AI has a total debt of near about 50,000 cr.  The major reasons for the failure of PSU are as follows:

  • Less income generation in passenger revenue. This is corroborated by the audit report of CAG also. Airline lost revenue due to its own inefficiency like lack of aircraft availability, faulty deployment, low utilisation of human resources and lack of ancillary revenue.
  • Lack or faulty initiatives to monetise its assets- one of the primary requirement of meeting the revenue deficiency led to dip in the company’s fortunes.
  • The audit finds that there has been a mismatch in demand and availability of the airline. For instance, there was over provisioning of wide body aircraft where as it didn’t have required number of narrow body aircraft.
  • Air India can be on an expansion drive to new international destinations but the audit says that most of such routes burn a hole in the airline’s pocket as it fails to recover the cost.
  • According to the requirement, the company had 11,433 employees as against the envisaged requirement of 7,245. In addition there was under utilisation of pilots and cabin crews led to loss for the airline.
  • The AI has been competing with private sector airlines which are more efficient in terms of ticket pricing, decision making, choosing the right routes, providing value-added services, etc.
  • The ill-timed merger was the biggest reason as it led to huge losses

AIR INDIA is facing a lot of problem ang government has decided to sell AIR India. But the policy issues, large debt, players incapacity to buy AIR India are some of the problems which need quick attention. The market has to be perfect for realisation of optimum revenue.


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