‘Losing Rs 15 crore a day, govt might exit Air India altogether’https://indianexpress.com/article/business/aviation/losing-rs-15-crore-a-day-govt-might-exit-air-india-altogether-5214960/

‘Losing Rs 15 crore a day, govt might exit Air India altogether’

There would not be over 160 queries after the Preliminary Interest Memorandum (PIM) if there were no buyers for the airline, sources said.

Potential buyers were not comfortable entering into a partnership with the government and were apprehensive of interference, sources explained. (File photo by Pranav Mukul)

Debt-saddled national carrier Air India is understood to be losing close to Rs 15 crore per day, persons familiar with the development said. Consequently, the government may consider exiting the airline altogether, instead of holding 24 per cent, persons close to the transaction said on condition of anonymity. Such a strategy, they said, would ensure interest in the national carrier as also some clarifications on the airline’s finances.”There would not be over 160 queries after the Preliminary Interest Memorandum (PIM) if there were no buyers for the airline,” they said.

Potential buyers were not comfortable entering into a partnership with the government and were apprehensive of interference, sources explained. Moreover, there were anxieties about the actual level of debt and liabilities and also lack of clarity from the government on these. The government’s insistence that Air India be run on an arm’s-length basis would not allow the buyer to extract synergies between its existing airline and Air India.

READ | Air India divestment: Deadline expires, no bids for airline

The Tatas, for instance, run two airlines in India in a joint venture partnership. According to industry experts, the ministry for civil aviation should oversee the process after consultation with the stake holders instead of leaving it to DIPAM, government’s disinvestment department.

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It is to be noted that after the government failed to attract any bids in May, it has not paid its close to 1,1000 employees salary for the month of May. In a letter dated June 6, Meenakshi Kashyap, general manager (IR), wrote a letter to the Air India staff stating that the disbursement of salaries for the month of May 2018 is delayed and the payment is likely to be made on June 15.

EXPLAINED | Why no one wants Air India

Also on June 5, Air India invited bids from Indian/foreign institutions/banks for a government-guaranteed short-term working capital loan of Rs 1,000 crore to be drawn in June.

“Rising fuel costs will add to the losses especially since the intense competition will not make it easy to raise fares,” said Amrit Pandurangi, former director at Deloitte and an independent aviation analyst. The top two airlines in India, budget carrier IndiGo and full-service Jet Airways, both took a hit on account of fuel costs escalation in the fourth quarter of FY2018, with IndiGo’s profits slumping by 73 per cent from Rs 440 crore to Rs 118 crore and Jet posting a loss of Rs 1,040 crore.

Air India losses stand at Rs 5,765 crore (FY2017) and its total debt at Rs 48,781 crore. —FE