Govt’s Air India revival plan: Disinvestment, privatisation on the table

With state-run carrier Air India reeling under financial pressure, the chorus for its disinvestment has off late gained momentum, with Finance Minister Arun Jaitley being the latest to have suggested the same.

Written by Sunny Verma | New Delhi | Updated: May 31, 2017 8:36 am
air india, air india disinvestment, air india plans, arun jaitley, business news The ministry is working on a number of suggestions given by Niti Aayog on revival of Air India which include stake sale to a strategic investor. (Representational)

The Centre is examining all options, including disinvestment and privatisation of Air India, in order to turnaround the state-owned airline burdened by a mountain of debt, top aviation ministry officials said. A decision on the future course of actions for Air India is expected to be taken within three months. The ministry is working on a number of suggestions given by Niti Aayog on revival of Air India which include stake sale to a strategic investor. Air India’s consolidated debt has risen to around Rs 50,000 crore, even as the merger between the Air India and Indian Airlines approved in 2007 did not lead to the desired benefits that were expected to accrue from the merger — a matter now being probed by the Central Bureau of Investigation (CBI).

“Niti Aayog has made a recommendation for the course of action for Air India. They have suggested to take steps to make it a strong and viable airline. All courses of action are being examined by us to ensure this. Right now of course we can’t disclose beyond this point. We are not closed (to) any options,” Union Minister of Civil Aviation Ashok Gajapathi Raju said on Tuesday. Minister of State for Civil Aviation Jayant Sinha on Tuesday said the government is “considering all alternatives for making Air India into a stronger and even more viable entity” and it is working on a winning strategy for the carrier.

The ministers’ comments come days after finance minister Arun Jaitley said the private sector was capable of handling 100 per cent traffic in the aviation sector, indicating the need to disinvest the government’s stake in Air India. The Economic Survey 2017 had also suggested that government should privatise Air India. The airline earned an operating profit of Rs 105 crore in 2015-16 and expects to post similar level of operating profit in 2016-17. But the burden of servicing the debt, which totalled Rs 46,000 crore at the end of March 2016, led to the airline incurring net losses. Its net loss narrowed to Rs 3,836 crore in 2015-16 as compared to Rs 5,859 crore in 2014-15.

Raju said the aviation ministry will cooperate with the CBI, which has registered three FIRs and launched a preliminary enquiry to probe alleged irregularities in Air India-Indian Airlines merger and purchase of 111 aircraft, leasing of planes and giving-up of profit-making routes by Air India. These decisions, according to the CBI, caused a loss to the tune of thousands of crores of rupees to the exchequer. “Whatever the CBI does, that they are doing, we will cooperate with them, we have nothing else to say on that,” Raju said. Raju and Sinha were speaking at a press conference to mark three years of BJP-led government at the Centre.

The Congress-led UPA government pushed through the Air India and Indian Airlines merger in 2007, as it was expected to lead to cost savings and improved financial performance of the combined entity. As the synergies expected from the merger did not materialise and the combined entity’s financial performance deteriorated over the years, Air India has survived under a financial restructuring and turnaround plan in 2012 funded by the Centre. Sinha said that the “strategic and operational logic that would drive a merger has been difficult to achieve” in the case of merger of the two state-owned carriers. Under the turnaround plan, Air India will get equity infusion of Rs 42,182 crore over the period from 2011-12 to 2031-32, which is linked to a number of performance parameters. Till 2015-16, the Centre had infused equity worth Rs 22,280 crore.

In its audit report on turnaround plan and financial restructuring plan (TAP/FRP) of Air India released in March, the Comptroller and Auditor General of India (CAG) said Air India earned surplus over variable cost during 2012-13 and 2014-15, but it failed to generate enough surplus to meet the total cost, the deficit over total cost being Rs 5,514 crore in 2015-16. The CAG report also noted that the benefits for Air India from the FRP have been largely eroded by high volume of short-term loans.

A government official said the civil aviation ministry will review Air India’s turnaround plan in the backdrop of fresh discussion for stake sale in the national carrier. The government is expected to take a decision on the future course of action for Air Indian within three months, the official said.

For all the latest Business News, download Indian Express App

  1. D
    Jun 1, 2017 at 10:29 am
    May be its evacuation, flood relief, catering extreme insurgent North-East, bringing stretcher cases worldwide which no other Indian carrier uplifts to India from foreign countries, VVIP operations, regional connectivity, political commitments on non-viable routes, government obligatory charters & military charters on subsidized rates etc. , etc. The list of dedicated selfless service to India is too long to do ent. Why suddenly a Government considers Air India a Maharaja Airline and another Government considers it a loss making white elephant!! The stalwarts make perceptions and proclaim their judgment never imagining the collateral damage caused to those who strive for their lively hood by virtue of serving the airline. It is not that the employees of Air India are suo-moto acting on their whims and fancies to run the airline. The hierarchy channel goes right up to the Prime Minister of India and everyone has to be accountable for the so called callousness and national loss.
  2. S
    Sovon Sarkar
    May 31, 2017 at 8:04 pm
    There is a blog named as 'murdering the maharaja air india what really happened' posted back in 2011. If someone is really interested in knowing what and how it happened to Air India,search it on google, read it. Its not Air India who is sucking the taxpayers money, its the ministers and private airlines (including paid media) in the name of Air India. Nice planning (money from tax payers,private airlines, aircraft sellers...profit profit profit !!!) and good execution. Pity for those stupid hard working honest Air India employees as most of them must be innocent of all this.
  3. P
    May 31, 2017 at 12:43 pm
    Simply nothing is going to happen.this government is going to go in election mode after 6 months. Air India is a mulching cow for politicians.if air India is gone no one will be therefor the job of aviation minister just like no sane man wants to become defence minister and die with deteriorating kashmir issue.
  4. N
    May 31, 2017 at 12:12 pm
    It is shame on a BJP govt who boasts about good governance but are planning to privatise our historical Air India operating since independence. Can't this government govern in a good manner to make this Air India a profitable company like other efficient Airway. Being privatised because the govt can not govern their own & NDA's MPs/MLAs from misbehaving and looting Air India. No action taken by the govt agaist the Siv Sena MP who st ed the airplane recently. There are many such cases of unethical behaviou allowing MPs frre travel to a large extent. Can't Modi govern on these matters and make the AI profitable? Try it and you will be remem bered for Making AI profitable.
  5. D
    Damodar Biswal
    May 31, 2017 at 11:50 am
    The Maharaja is bleeding because of excessive control of our lawmakers over it.Privatise it.Bleeding will stop.
  6. G
    gary george
    May 31, 2017 at 11:35 am
    At any time of the working day, Calcutta Air India office has more staff than clients. Waste of prime office space and meagre resources.
  7. Load More Comments