Should distressed airlines be bailed out? Experts answer

If there is a bailout for airlines in distress, should the government seek an equity stake in return so that taxpayers gain from an upside? Should there be a bailout in the first place? How justified are companies when they lay off thousands of employees at one go? Vivian Fernandes gets the answers.

 

Here is a transcript of Vivian Fernandes' comments on CNBC-TV18. Also watch the accompanying video.

 

The plight of his employees protesting their dismissal has moved Jet Airways Chairman Naresh Goyal's soul promoting Civil Aviation Minister Praful Patel to renew his cry for help for airlines in whom high oil prices have burned a hole.

 

Patel said, "Nobody has asked that the government should give a cheque to airlines. All we are asking is for rationalisation of airline turbine fuel (ATF) prices."

 

A bailout has been ruled out for the moment, but should continuing economic distress compel the government into a rescue act, how should it respond? Should it pick up equity stakes in airline companies to whom it provides comfort, like the UK and US government have done in banks, so that the Indian taxpayers gain from a future upside in the fortunes of airline companies?

 

Arun Shourie, Member of Parliament, Rajya Sabha, said, "Airlines are not in the same class. In India, we should be prepared for developments in which some airlines will go under. There will be mergers and acquisitions."

 

Rajeev Chandrasekhar, President of Federation of Indian Chambers of Commerce and Industry, said, "Ficci is opposed to using taxpayer money for a bailout. What we have suggested is a solution to the liquidity crunch in the aviation industry by creating a liquidity stabilisation fund."

 

Airlines are not banks, they do not pose a systemic risk, and so do most industries. So they may not qualify for a government bailout. But should they go about employee layoffs that may be forced on them. Compensation prescribed by labour laws is a pittance, because trade unions have opposed amendments proposed during the NDA regime for graded higher levels of compensation depending on whether the layoffs are by firm being put to sleep, or to enable its recovery.

 

Shourie said, "In the end, laws that cannot be sustained by economic forces will be violated as happened with extortionate tax rates, so many of us have been pleading for a long time to have rational labour laws."

 

Chandrasekhar added, "Layoffs whether it is 100 people or 10 people have to be governed by labour laws. These are real people you can't just be striking them off."

 

Employees are not the key to the economics of airlines companies. So caution is advised before they proceed with the pink slip.