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  1. Air India sell off: What has Arun Jaitley’s privatisation plan got to do with your children?

Air India sell off: What has Arun Jaitley’s privatisation plan got to do with your children?

After the government’s repeated denials of plans to privatise the Air India over the last one year, Finance Minister Arun Jaitley has finally spoken openly about the intent to exit the ailing state-run carrier, in order to lighten the debt load.

By: | Published: May 29, 2017 12:08 PM
air-india-sell-off, air-india-privatisation, air-india-disinvestment Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling with a debt of about Rs 50,000 crore. (Image: Reuters)

After the government’s repeated denials of plans to privatise the Air India over the last one year, Finance Minister Arun Jaitley has finally spoken openly about the intent to exit the ailing state-run carrier, in order to lighten the debt load without apparently losing much of the value that it provides to the country’s aviation industry.

“History has given us a second chance that a good investor should come, which has credibility so civil aviation ministry will consider it,” Arun Jaitley said, referring to proposed disinvestment of Air India, in an interview to Doordarshan TV, aired over the weekend.

Debt clips wings

Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling with a debt of about Rs 50,000 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 profit since at least the year 2007.

“To run Air India, you have invested Rs 50,000 crore. That money is government’s money, that’s your money. It could have been used for school education,” Arun Jaitley said during the interview. 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.

Air traffic control

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

Arun Jaitley said Air India could be converted into a private airline, since private carriers anyway control a huge majority of the market. “And if 86% of flying can be handled by private sector, so it can also handle 100%,” he said.

Earlier February, Civil Aviation Secretary Rajiv Nayan Choubey categorically denied the news about the government planning to sell a majority stake in Air India, saying that there is no such proposal and the government is not planning to sell any stake in the PSU giant.

Before than in the past too, there had been several other news of the government considering selling stakes in Air India through various means, including an IPO, but the government always came back denying any such considerations. It maintained that the priority is to sustainably tackle Air India’s large debt.

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