Industry experts differ on whether it is right time to sell the loss-making carrier
After years of delays, things seem to be finally moving fast in relation to the disinvestment of national carrier Air India.
If all goes as planned, the upcoming Union Budget may be the last one for Air India as a national carrier - around 65 years after it was nationalised after the then government bought it from JRD Tata.
During the last Budget, the airline was allotted Rs 1,800 crore as equity infusion in 2017-18 under the government's Rs 30,231 crore financial bailout package. Similarly, during 2016-17, the allotment was Rs 1,713 crore. In 2015-16, an amount of Rs 2,500 crore was earmarked.
Though the allotment has been flowing for the past several years, the infusions are too little and too late for the carrier which has a debt of about Rs 48,877 crore at the end of March 2017, say experts. Of the total debt, around Rs 17,360 crore is aircraft loans and Rs 31,517 crore working capital loans.
Soon after the Union Budget announcement, the first major step the government is expected to take in February is issuing of an expression of interest (EoI) for the sale of Air India's stakes to the private players. A draft of the EoI is already being prepared, claim the sources in civil aviation ministry.
Last week, the government announced doing away with the restrictions and allowing foreign airlines to invest up to 49% under approval route in Air India, a policy which till now was applicable only to private carriers. The development is expected to clear the way for Singapore Airlines and Tata Group-backed Vistara to bid for Air India. At the same time, other Indian carriers such as IndiGo and Jet Airways can get into tie-ups with a foreign carrier for investment in the national carrier.
Junior aviation minister Jayant Sinha during a recent interview had said that Air India will be broken into four separate companies and 51% of stake in each of it will be open to disinvestment.
The government, it seems, is going ahead with the privatisation plan despite a parliamentary committee report requesting it to give defer the move for five years before taking any decision.
According to Nawal Taneja, airline business strategist, author and former professor of aviation management at Ohio State University, Air India can benefit from the global movement in market consolidation.
“Given the potential growth in Indian domestic market as well as the market to and from India, there would be many potential investors but not until it has been privatised and run by management with a total commercial orientation,” said Taneja.
“As such, the government should consider not only 49% that can be acquired by foreign airlines and investors but also the 51% that can be controlled by Indian citizens. In addition, the government needs to have serious plans to eliminate the huge debt carried by the airline. With these two major changes alone, Air India has the potential to become a major global player just like fast-growing brands from China. Without these changes, it will continue to struggle like Alitalia and South African Airways,” Taneja adds.
However, aviation expert and aerospace journalist Hormuz P Mama differs when he says that the airline must first be stabilised and only later should it be offered for disinvestment. Mama believes if it gets sold in the present situation, then the private airline which purchases it may not try to revive it as it would mean competing with itself.
“Another alternative is to let it die,” Mama, who has over five decades of experience in aviation and has authored many books on the subject, said with a punch.
THE LEGACY FLIGHT
- Air India, co-owned by Tatas, central government and public was formed
- In 1952, government decided to nationalise the airline
- In 2007 Air India (international) and Indian Airlines (domestic) were merged
WHAT BOEING SAYS
- 2,100
– Demand for new airplanes in India, valued at $290 billion
- Over 5.1%
– Of global demand for planes to come from India
- Over 20%
– Traffic growth as compared to global average of 7.3 %
- 23%
– Domestic passenger traffic increased last year from 2016
- Over 60%
– Of all flights are from low-cost carriers
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