Air India disinvestment should improve competition within the aviation sector: IATA official

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Published: December 12, 2019 6:11:47 PM

"The only thing that we can say about privatisation of Air India is that if it has to be done in a way that would probably maintain or improve the competitive conditions of the market,” Alexandre de Juniac, Director General, International Air Transport Association (IATA) said on Wednesday.

Air India, Air India disinvestment, aviation sector, IATA, Jet Airways, Jet Airways bankruptcy, DGCA, EoIOn December 5, Civil Aviation Minister Hardeep Singh Puri told the Parliament that the preparation of Preliminary Information Memorandum (PIM) for inviting Expression of Interest (EoI) for Air India disinvestment is in process.

As the Indian government plans to invite bids for Air India during the next few months, a top official of global airlines body IATA said on Wednesday that the disinvestment of the national carrier should be done in a fair and transparent manner and in a way that it improves competition within the aviation sector of the country. Moreover, the official said that the Jet Airways’ bankruptcy – which happened in April this year – does raise questions on the sustainability of the Indian aviation sector.

“The only thing that we can say about privatisation of Air India is that if it has to be done in a way that would probably maintain or improve the competitive conditions of the market,” Alexandre de Juniac, Director General, International Air Transport Association (IATA) said on Wednesday. “And, also, it should allow the government to devote some of the resources, which it was giving to Air India, to the wider aviation sector probably,” he told reporters.

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According to the last month’s data provided by aviation regulator DGCA, low-cost carrier IndiGo carried around 47 per cent of domestic passenger traffic. SpiceJet and Air India were at number two and three with around 15 per cent and 13 per cent share, respectively.

On December 5, Civil Aviation Minister Hardeep Singh Puri told the Parliament that the preparation of Preliminary Information Memorandum (PIM) for inviting Expression of Interest (EoI) for Air India disinvestment is in process.
Juniac told reporters here, “It has to be done for Air India in a way that will improve the competition in the country, that will not harm one airline against another, or the national airline against the foreign airlines. It has to be fair.”
He said the disinvestment process should be on the principles of “equal, fair and transparent”.

“We generally do not have a position in principle, to say that whether or not it is good to have nationalised airline or a flag carrier that is owned by state. There is no magic rule that we would advocate for,” he said. Air India’s net loss in 2018-19 was around Rs 8,556 crore.

“It is a privatisation process. It has to be attractive for the investors. They will judge the financial status of the company, potential, startegic fit…it is normal privatisation process where we have nothing to say,” he noted. In April this year, Jet Airways – which has been an IATA member – shut down its operations as it ran out of funds. When asked if Jet Airways’ bankruptcy raises question on the sustainability of the Indian aviation market, he replied, ”Of course, it raises a question. When you have a big player going to bankruptcy, it raises questions.”

“The operating costs for airlines in India are too high. So, you have enormous pressure on your P&L (profit and loss) due to operating costs that are too high mainly due to infrastructure charges, fuel taxes, excise, etc,” he added.
“Strong competition and high costs make life difficult for the operators,” Juniac said. Currently, in India, the IATA has Vistara, IndiGo and SpiceJet as its members. Overall, across the world, the IATA has more than 80 per cent of airlines as its members. P

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