AI's professional management teams aside, the airline will always be stymied by the Aviation ministry. Years ago, my father worked for a Govt of India enterprise (the oil industry) and he was always up in arms against assignments and promotions being meted out as political favors that professional management teams could do little about. In the end, he got so frustrated, he quit in disgust. I may be wrong, but I'm sure that professional toady-ism, sychophancy, etc etc are endemic problems at an institution like Air India which is such a plum assignment for most Govt of India types.
Also, I seriously do not see how allowing another Indian carrier to fly on international routes will set Air India back, any more than giving additional routes to Emirates, Malaysian, etc etc (which will have to be done as the traffic in and out of India increases). AI compete with international carriers already on routes to and from India and on those sectors where they have 5th freedom rights, so competition is not an alien concept to Air India. Of course, bilaterals will need to be re-negotiated if this does happen, allowing for two or more designated Indian carriers on a route.
Also, when you say "... allowing private airlines access to international markets without giving AI the flexibility to compete is a losing proposition..." what is it that you are referring to? Cutting off the Aviation Ministry's shackles, so that AI can hire/fire employees, purchase aircraft, enter into alliances, etc etc etc? In that case, "flexibility to compete" will be a distant mirage, given that Air India is held hostage by more than just the Aviation ministry. It basically implies that the only benefactors of the Aviation ministry's protectionist policies are foreign carriers, with AI stuck in "never never land" and Indian domestic carriers forbidden to even enter the fray.
Atheism is Myth Understood.