Monday, March 26, 2012

Bold ideas for a New India - #1

In year 2009-2010, Air India Ltd. spent a humungous 3,356 crores in salaries and crew allowances. It spent an additional 13,224 crores in operational costs and yet ended with a loss of 5,552 crores.

If Air India Ltd. were to divest itself completely, here is what the GOI could do with the money that goes into a dark hole year after year:

Average gross monthly salary of a Professor in a National Institute of Technology, Warangal is INR 1,00,000. Which means, the salary and crew allowances can fund a staggering 27,960 Professors every year. The annual operating costs for Year 08-09 at Warangal less salaries, was around 22 crores. In other words, Warangal could be funded 600 times in the same cost that the GOI spends in running AI annually (excluding salaries in both cases). Considering 30 NITs across India and assuming each has an average operating expense (less salaries) the same as Warangal, each of them could be funded 20 times over in 1 year.

What happens to the employees of Air India? Well, this is where some of the boldness comes in. Let the buyer decide, the competent employees will either be asked to continue or find jobs with other competing airlines. The rest, well, there will be collateral damage, but in the worst case scenario, a VRS could be offered as a graceful exit.

What does India need more? A sinking airline, which is resurrected regularly using tax payer money OR provide millions of children access to a world class education system?

Link to PDF versions of the Balance Sheet and P&L for AI Year 2009-2010

Pay structure of employees at Warangal NIT