Cabinet OKs Air India Disinvestment; GoM Will Decide Stake Sale, Debt Management

The Union Cabinet on Wednesday gave an in-principle approval for disinvestment of debt-laden state-run carrier Air India, paving the way for privatisation of the national carrier which became sort of a mascot for brand India overseas but also turned into a taxpayer money guzzling machine ridden with inefficiencies and mismanagement.

The government will form a Group of Ministers to look into the ways to divest its equity stake in Air India, Finance Minister Arun Jaitley said, adding that the GoM will also decide on the modalities of the proposed disinvestment, including the quantum of the stake to be diluted and ways to deal with the carrier’s existing debt. The government has accepted the NITI Aayog suggestions on privatisation of Air India, he said.

Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling under a debt of over Rs 52,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. It has not turned profit in 10 years, since at least the year 2007.

Air India’s market share in domestic market has fallen to 14% in 10 years from 35% a decade ago, placing it third in the national ranking, behind Indigo, which commands about 40% of Indian skies, and Jet Airways, which has about 16% of the share. Air India also flies overseas, and commands 17% of the international traffic from and into India.
Air India has guzzled up taxpayer money over and over again but to no effect. The carrier has received bailout packages worth about Rs 24,000 crore out of a total Rs 30,000 crore approved, but has failed to revive its fortunes amid private airlines continuously gaining market share.

Recently, top government representatives, including Finance Minister Arun Jaitley and Civil Aviation Minister Ashok Gajapathi Raju have spoken openly about their plans to sell Air India. Earlier last month, in an obvious reference to potential difficulties in finding a willing buyer for the debt-laden behemoth, aviation minister Raju had proclaimed that it might be difficult to find any ‘bakras’ to buy Air India.

Earlier last week, ET Now reported that the Tata Group is considering buying the giant beleaguered state-run carrier from the government in partnership with Singapore Airlines. The report had also said that the government, which is also reportedly keen on retaining Air India as a domestic carrier, is happy with the Tata Group’s interest in the heavily debt-laden carrier, and is even likely to mandate that a controlling stake be bought by an Indian entity. Tata Group chairman N Chandrasekaran has held informal talks with the government, expressing preliminary interest in buying a controlling stake in Air India with a 51% equity holding, ET Now reported, adding that the the group may bring in Singapore Airlines to buy the balance 49%, if the government goes for complete privatisation of the airline.

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