June 20, 2018 TnH Global 1

Air India sale delayed indefinitely, may be cancelled

The aviation sector globally is going through a difficult time due to high crude oil prices. So, it is not the right time to sell stake in Air India, says Suresh Prabhu.

The government has put the Air India privatization on deep freeze citing the tough environment for the aviation industry, weeks after its attempt to sell the national airline flopped.

“The aviation sector globally is going through a difficult time due to high crude oil prices. So, it is not the right time to sell stake in Air India,” aviation minister Suresh Prabhu said in an interview on the sidelines of an event in New Delhi on Tuesday.

“We will review the proposal when the situation improves,” he added.

The move may force the government to continue infusing capital to sustain the money-losing airline. It will also make the government’s target to garner Rs. 80,000 crore through disinvestment in 2018-19 more challenging. The decision to defer the sale of Air India was taken on Monday at a meeting chaired by Union minister Arun Jaitley.

Prabhu, interim finance minister Piyush Goyal and transport minister Nitin Gadkari were also present at the meeting. The government’s plan to sell 76% in Air India, which had Rs. 48,781 crore of debt as of March 2017, drew a blank. The proposal to let Air India and Air India Express Ltd, its low-cost international arm, retain debt and net current liabilities of Rs. 33,392 crore at the time of sale, was a major deal-breaker for parties that were initially interested.

Apart from infusing fresh capital into the airline, the government may also bring in professionals from the private sector to revive Air India, said a person familiar with the development, requesting anonymity. The national carrier is also not eligible to be listed on the stock exchanges as Securities and Exchange Board of India (SEBI) rules require three consecutive years of profitability before initiating the listing process.

“Sebi is not in favour of making an exception for Air India to list the airline bypassing necessary norms,” said a second person who is familiar with the regulator’s thinking.

“The national carrier is also looking to maximize utilization of its resources to turn profitable. Till the time Air India doesn’t post regular profits, listing is unlikely,” said a third person familiar with the matter. He also did not want to be named. Aviation analyst Kapil Kaul of CAPA India said he is disappointed with the government’s decision.

“Continuing government ownership with no clear roadmap will lead Air India to extreme insignificance and possibly closure,” Kaul said.