1. Air India forms internal panel to assess concerns ahead of divestment

Air India forms internal panel to assess concerns ahead of divestment

In order to assess concerns ahead of its divestment program, Air India, the flag-carrier airline of the country, on Wednesday formed an internal panel. The Director (Finance and Personnel) of the government-run airline will be a part of the panel

By: | Published: December 6, 2017 3:01 PM
Air India, Air India privatisation, capital constraints, privatising Air India, acceptable risk-reward, risk-reward trade-off, transaction equitably  The department of investment and public asset management (DIPAM) of the finance ministry had decided to go for a strategic divestment route in Air India .(Image: PTI)

In order to assess concerns ahead of its divestment program, Air India, the flag-carrier airline of the country, on Wednesday formed an internal panel. The Director (Finance and Personnel) of the government-run airline will be a part of the panel, CNBC-TV18 reported citing unidentified sources. Air India panel will likely consider Voluntary Retirement Scheme for employees above 55 years. Air India has over 20,000 employees on payrol. Meanwhile, Civil aviation minister Ashok Gajapati Raju today said the government wants to make Air India vibrant for which plans on an ‘alternative mechanism’ was being worked out. The national carrier, entirely funded by government, was making losses and was now in a debt trap due to interest burden. “We want to make Air India a vibrant entity and not to go the Kingfisher way”, Raju told reporters here. He said the government was working on an ‘alternative mechanism’ and all options were being explored. Raju said “Air India’s financials are bad. But we want it to continue to be in the skies”. The minister said private carrier Indigo had given expression of interest in Air India’s overseas operations, while the Tatas were making only verbal enquiries. “There is nothing in writing from the Tatas, it is only verbal”, he said.

Meanwhile, the department of investment and public asset management (DIPAM) of the finance ministry had decided to go for a strategic divestment route in Air India. Transaction advisors had also been appointed, Raju 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 profitable in 10 years, since at least the year 2007. The government in September this year invited applications from investment bankers, law firms and other entities to advice on the strategic stake sale of the flag carrier. The government had decided on strategic disinvestment of loss-making Air India by early 2018, which is guzzling up taxpayers’ money ridden with inefficiencies and mismanagement.

Air India’s market share in the domestic market has fallen to 14 percent in 10 years from 35 percent a decade ago, placing it third in the national ranking, behind Indigo, which commands about 40 percent of Indian skies, and Jet Airways, which has about 16 percent of the share. Air India also flies overseas and commands 17 percent 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.

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