India’s failing national carrier, Air India, has been dealt another blow as the Star Alliance has shelved acceptance in the alliance, citing that the carrier fails to meet Star Alliance standards.   Typically, standards for alliance membership cover computer systems integration, operations and maintenance, and service levels.  India, with a strong industry, should have no trouble with the first, and with Air India’s chronic over-staffing, should have no trouble with passenger service.  That likely means that some of the fundamentals are wrong.

Air India’s failure to meet the minimum requirements of the Star Alliance illustrates how far the once proud “Maharaja” has fallen.  No longer able to meet international standards, perhaps the time has come for Air to be privatized.  This would put the carrier into the hands of those who can create a productive airline without government interference in routes and labor relations.  Private capital can accomplish what government cannot, if permitted to do so.
Currently bloated with excess staff, Air is losing more than $1 billion US per year.  Staffing levels are perhaps best illustrated in the following chart, that maps all of the Star Alliance carriers.  Note the comparison of the Star Alliance average in green versus Air India in red.
Given this level of over-staffing, one might expect personalized service on Air India.  Apparently, many employees consider their jobs a political patronage entitlement rather than being productive, and the government and unions, both seeking maximum employment levels, have rendered the carrier uncompetitive.
Of course, the other alternative is to disband Air India, sell its routes to other Indian carriers, and allow a free market without government interference to enable those that would provide a productive Indian airline industry to do so.  Having already fallen to number four in the domestic market, with a collapsing image vis-a-vis competitors, liquidation might be the best alternative. While domestic prices would rise, as Air India’s pricing below cost is unsustainable, the market would stabilize, safety would improve, and the industry grow via healthy, rather than artificial, government influenced competition.
This is a wake-up call for the Indian government.  The question is whether they hit the snooze button and continue let Air bleed cash and lose market share at the expense of taxpayers, or take a more rational alternative and cut their losses.  Airlines do become inefficient and need change – perhaps best demonstrated by the demise of Pan Am, TWA, Eastern, Braniff and many others.  But new, more efficient operations have taken their places.  That same natural transition needs to happen in India.
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