Monday, July 3, 2017

Will Air India say Tata to IndiGo?

WITH Union Cabinet last week (June 28) formally approving the privatisation of Air India and five of its subsidiaries, the race for the ownership of the beleaguered national carrier is now wide open. Finance Minister Arun Jaitley said at a press meet that he would be heading a group to work out procedures for the Air India disinvestment. With an outstanding debt...
burden of Rs52,000 crore, it is not feasible to sustain the national carrier, feels the government.
After report about Tata Group, the original owner of the Maharajas, joining the race to buy Air, IndiGo, India’s biggest airline by market share, has also expressed an interest in buying Air India. Reports say that IndiGo wants to preferably buy only the international operations of Air India and its low-cost airline Air India Express. IndiGo has 41 percent share in the domestic market.
Now, it will be interesting to see if IndiGo can score over the original owner of the Maharajas. In fact, the possibility of one or two more airliners joining the fray to own stake in the Air India can't be ruled out.
The group under Jaitley will decide on the treatment of unsustainable debt of Air India, hiving off certain assets to a shell company, spinning off and selling stakes in three profit-making subsidiaries, the quantum of disinvestment, and the eligibility criteria for the bidders, the government said in a statement.
This group will then report back to the Union cabinet for final approvals. The constitution of the group will be done “quite fast”, Jaitley said without mentioning any timelines.
Air India was launched in 1932 by J.R.D. Tata as Tata Airlines. Its name was changed to the current one in 1946. The government decided to take it over in 1953.
Air India has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations.
Apart from the planes, the airline also has vast land holdings, including nearly 32 acres in central Mumbai, besides its iconic headquarters on Marine Drive valued at more than Rs1,600 crore. It also has properties in New Delhi, London, Hong Kong, Nairobi, Japan and Mauritius.
Experts are of the view that privatisation is the only out for the ailing airline.
The airline has so far received Rs23,993 crore of the Rs30,231 crore equity infusion promised by the government under a financial restructuring plan in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore in the previous year.
The Economic Survey 2017 recommended that the government privatize Air India. Late last month, finance minister Jaitley disclosed that the aviation ministry had been asked to look at all options of privatisation. A committee of top bureaucrats which included civil aviation secretary R.N. Choubey then sent its views on Air India’s divestment to the Department of Investment and Public Asset Management (Dipam).

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