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Air India’s quest for privatization 2.0
June 30th 2017
The Indian government has once again decided to privatize national flag carrier, Air India. On Wednesday, India’s cabinet gave “in principle approval for the disinvestment” of the airline. Read More » Delhi would like to retain some control of Air India, so the sale of a minority stake of up to 49% is the most likely scenario.
Interested parties will not only gain a foothold in the airline, they will also have to absorb the airline’s massive debts. Air India was loss-making for almost a decade until it eked out a minor profit last year. It has received a US$5.8 billion bailout package from the government to keep flying.
The airline is in better shape now than it has been for several years. It has expanded its long-haul network, particularly with nonstop flights to the U.S., which the airline said are very profitable, especially since the Trump administration imposed an onboard electronics ban on flights departing from most Middle Eastern countries.
Air India, once the dominant player in Indian aviation, has fallen back to number three. Low-cost carriers, IndiGo Airlines and SpiceJet, hold a combined 42% of the market.
The Times of India has reported that Tata Group chairman, Natarajan Chandrasekaran, has had informal talks with the government about taking equity in the flag carrier. The proposal is said to include Singapore Airlines (SIA), Tata’s joint venture partner in Vistara. The Gurgaon-headquartered full-service carrier was launched in 2014. Tata and SIA made an unsuccessful bid to acquire 40% of Air India in 2000. Air India was founded by J R D Tata and nationalized in 1953.
IndiGo also has expressed an unsolicited interest, CNBC reported on Thursday, quoting the aviation ministry.
Author and a former executive director at the flag carrier, Jitender Bhargava, said: “If the government holds even a minor stake, the propensity to meddle, to do back seat driving can’t be curbed,” he said. “I am convinced that Air India can’t be revived or survive in its current state. It is a good move.”
