January 15, 2018 TnH Global

Government to take big hit in bid to offload Air India stake; disinvestment to complete by 2018 end

Air India, the debt-laden national carrier, stake sale to be completed by the end of 2018, but before that, the government will assume the non-core debt, Minister of State for Civil Aviation, Jayant Sinha said.

Air India, the debt-laden national carrier, stake sale will be completed by the end of 2018, but before that, the government will assume the non-core debt, Minister of State for Civil Aviation, Jayant Sinha said. ET Now, quoting the minister, reported that the government will split Air India into four before the sale, however, both Air India and Air India Express will be sold as one company.

Last week, to open channels for the stake sale, the Union Cabinet allowed 49% Foreign Direct Investment in Air India. As the national carrier, Air India slowly turned into a taxpayer-money guzzling machine ridden with inefficiencies and mismanagement, after which the Union Cabinet headed by Prime Minister Narendra Modi approved disinvestment of this debt-laden air carrier.

The government, since then, has been slowly and systematically going forward with the plan, with Tata Group, IndiGo and Bird Group expressing interest in either buying the troubled national carrier or buying parts of it. IndiGo, earlier, had said that even though it is interested in buying a part of Air India, it cannot take all of its liabilities.

Amid the government’s efforts to explore the sale of Air India’s stakes, a parliamentary panel concluded that it was not the right time to time to privatise the national carrier and it should be given at least five more years to revive. Interestingly, two days after the parliamentary panel’s recommendations, the government, without paying much heed, approved the FDI of up to 49% under approval route in Air India.

Air India has long been a mascot for brand India, but by 2009 the state-run carrier began reeling under a huge pile debt and its services started deteriorating. Air India, under intense competition from leaner, more efficient and often-cheaper private airlines piled up a debt of over Rs 52,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore per year in interest burden alone. It has not turned the profit in 10 years, since at least the year 2007.