Govt Will Sell 100% Of Air India To Private Firms; If Sale Fails, Then Air India Will Shut Down

There’s an attractive amount of conundrum going on about the state-run national carrier, Air India and government’s hardcore attempt to sell the high-profile asset. Almost recently, the Finance Minister Nirmala Sitharaman expressed her confidence in the government’s focused disinvestment of Air India.

What’s new this time is the fact that has just flooded in. Unfortunately, the debt-laiden airline will have to shut down if a renewed attempt to sell it fails to find a buyer, as informed by India’s civil aviation minister Hardeep Singh Puri yesterday.

Govt to Sell 100% Stakes in Air India

It is no secret that Air India hasn’t made money since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. and is in constant burden of debt, concluding the government’s decision to sell it.

In 2018, the government put up 76% of Air India for sale, which saw a weak demand from investors. The tepid response during the bidding process led to the govt to abort the airline’s sale. This is the government’s second attempt to sell their stake in Air India.

This time however, the Centre has decided to divest its entire stake in Air India Ltd and its no-frill subsidiary Air India Express, as last time it failed to attract bids for a partial stake.

Air India Specific Alternative Mechanism (AISAM) has approved the 100 percent sale of Government of India’s stake in Air India, along with Air India Express and government’s stake in AISATS for the re-initiated strategic divestment of Air India. The international carrier is saddled with $11 billion in debt.

The government is pretty desperate to sell off the airline, as it is crucial to bridge a widening fiscal deficit exacerbated by tax collections and a $20 billion corporate tax cut.

Air India’s operating expenses rose about 24% Y-o-Y to ?30,194.06 crore during fiscal 2019. The airline has been surviving on a rescue package, approved as a part of its Turn Around Plan (TAP) on 2012. Under this plan, the government infused over ?29,000 crore into Air India. Notwithstanding, there are no more rescue package plans for the national carrier.

Air India Shall be Shut Down if Not Sold

The international carrier is saddled with $11 billion in debt. It net debt swelled to ?58,351.93 crore at the end of March 2019 from ?55,000 crore at the end of March 2018, which includes working capital and aircraft-related debt. Selling Air India, which has about 128 planes, will help the government exit a loss-making business.

A group of ministers concerned with this whole Air India case have agreed to sell the entire government stake in the carrier at low costs, as pumping in more taxpayer funds into the airline doesn’t come out to be the best idea.

Modi’s administration is considering a plan to exclude $7 billion of the airline’s debt, to lure buyers.