Who made India's Maharaja a pauper? CBI probe to get to the bottom of failed Air India-Indian Airlines merger

The Central Bureau of Investigation (CBI) earlier announced that it will probe the controversial merger of Air India and Indian Airlines to get to the root of the woes plaguing the beleaguered national carrier.

The CBI filed three FIRs and a preliminary enquiry (PE) to go into the controversial decisions made by the erstwhile UPA government with regard to the merger of two national carriers, including surrender of profitable routes to favour private airlines.

Read more: CBI lodges cases to probe Indian Airline-Air India merger; purchase of 111 airplanes

“The allegations relate to purchase of 111 aircraft costing about Rs 70,000 crore to benefit foreign aircraft manufacturers. Such a purchase caused an alleged financial loss to the already stressed national carriers," Gaur said about the first FIR.

Buried in debt for years, the state-owned airline has been staying afloat on taxpayers money. By the end of March 2015, the so-called 'Maharaja' of Indian airways had accumulated a debt of Rs 51,367.07 crore. At the end of FY16, the airline’s debt had been reduced to around Rs 46,000 crore. Out of this, Rs 28,000 crore were short-term loans.

Many have alleged that the reason behind this despicable state of Air India's finances is the merger with India Airlines.

"The biggest reason for the downfall of this airline was the merger between Air India and erstwhile Indian Airlines, which was done despite the fact that both carriers are totally opposite of each other," Air India chief Ashwani Lohani had told the Economic Times when asked for the reasons behind the airline's downfall.

The merger between the airlines had created a behemoth with 30,517 employees - 214 per plane. In comparison, back in the day, Singapore Airlines had 161 while British Airways had 178.

Back in 2012, a CAG report had termed Air India's move to purchase 111 planes during the merger a "recipe for disaster". "This was a recipe for disaster and should have raised alarm bells in the Ministry of Civil Aviation, Public Investment Board and the Planning Commission", the report had said.

The merger had tried to achieve economies of scale in areas such as maintenance, ground operations, use of landing slots and parking rights.

But post the merger there was a major decline in customer service due to integration issues. Further, inflating looses due to increasing prices of Aviation Turbine Fuel (ATF), decrease in customers due to recession and the heavy burden of costly acquisition of aircraft fleet.