That Air India, our national flag carrier, is in trouble is not surprising. Most airlines in India and across the world are reeling under a sharp dip in passenger traffic, and slowly rising fuel prices.

Earlier this month, British Airways appealed to some of its employees to voluntarily work without pay, or take unpaid leave; and even earlier, Jet Airways unveiled a plan to cut $600 million in costs, mainly through reduced incentives and other payments to employees; and Kingfisher is desperately trying to sell a stake to survive the downturn.

What is surprising at Air India – more bloated from the merger with the domestic airline Indian Airlines – is the depth of the crisis, and the suddenness with which this is being revealed. If a blog is to be believed, the airline is losing Rs. 150 million each day. Obviously, this was not something that came over its head overnight. Why was an alarm bell not sounded earlier? If it was, what did the government do about it? After all, the entire airline is owned by the government.

The financial rot was revealed for the first time only earlier this month when the airline said salaries for the month of June would be delayed by 15 days, providing a glimpse of the crisis. A few days later, managing director Arvind Jadhav urged senior executives to forgo their salaries and incentives in July, much like the British Airways plea. But the shocking thing is, the airline has previously revealed no plan to rationalise its operations and cut costs, almost as if it had never anticipated this crisis.

Now, what happens?

The government, a report in The Financial Express says, has agreed on a bailout package of a $1-1.5 billion, but not the $3 billion sought by the airline. Even before the bailout has been agreed upon are suggestions that the amount will be wholly inadequate. This is because most projections have been based on crude oil prices of no more than $50 per barrel. Now oil prices have soared to near $70 and are unlikely to fall to $50-levels.

Clearly, the government is paying for its tardy reforms process. Air India’s merger with Indian Airlines was done in 2007 but a planned IPO never got the urgency it deserved, even when market conditions were ripe for the offering. If Air India had made it, the airline would have had a ready hoard of cash, and chances are its management would have responded to the crisis sooner and, I dare say, better.