Amid coronavirus outbreak, Air India disinvestment might be ‘quite difficult at this moment’: IATA

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Published: March 5, 2020 9:30 PM

The outbreak, which has infected over 95,000 people and resulted in more than 3,200 deaths worlwide, is taking a toll on the global airline industry, especially due to travel restrictions.

air india, air india privatisationThis is the second attempt by the government in as many years to divest Air India, which has been in the red for long.

International airlines’ grouping IATA on Thursday said Air India’s disinvestment process might be “quite difficult at this moment” amid the coronavirus outbreak, which will hit the global market for Indian carriers as well as inbound tourist traffic into the country.

The outbreak, which has infected over 95,000 people and resulted in more than 3,200 deaths worlwide, is taking a toll on the global airline industry, especially due to travel restrictions.

Against this backdrop, IATA Chief Economist Brian Pearce said, “I think it is going to be very difficult times for the (Indian) airlines”.

“Clearly, the international market for Indian carriers is going to be a lot weaker and inbound tourist traffic is going to be hit very hard by the effect of the coronavirus crisis,” he told PTI here.

According to him, there could be further consolidation of Indian airlines in the wake of the situation created by the coronavirus outbreak.

“Privatisation of Air India is a necessary step for the long-term for the Indian market,” he said.

The Indian government plans to sell 100 per cent stake in loss-making Air India and has issued an Preliminary Information Memorandum (PIM) for the carrier’s disinvestment.

Pearce said that Indian should see consolidation to sort out the Air India privatisation but pointed out that equity markets are already quite weak at the moment. The industry is being hit by the shock of the coronavirus, he added.

“That makes it quite difficult at this moment,” Pearce said in response to a question regarding Air India disinvestment.

On January 27, the government came out with a Preliminary Information Memorandum (PIM) for Air India disinvestment. It has proposed selling 100 per cent stake in Air India along with budget airline Air India Express and the national carrier’s 50 per cent stake in AISATS, an equal joint venture with Singapore Airlines.

This is the second attempt by the government in as many years to divest Air India, which has been in the red for long.

On Wednesday, the government permitted Non-Resident Indians (NRIs) to own up to 100 per cent stake in disinvestment-bound Air India.

The International Air Transport Association (IATA), on Thursday, projected that the airline industry could lose up to USD 113 billion in revenue this year due to the impact of the coronavirus outbreak.

The grouping’s previous analysis, issued in February, put the lost revenues at USD 29.3 billion. This was based on a scenario that would see the impact of COVID-19 largely being confined to markets associated with China.

Since then, the coronavirus has spread to over 80 countries and forward bookings have been severely impacted on routes beyond China, IATA said.

Speaking after a two-day workshop on COVID-19 here, Pearce said “limited spread” scenario implies a USD 63 billion loss of passenger revenue worldwide in 2020.

The “extensive spread” scenario implies a USD 113 billion loss of passenger revenue worldwide in 2020. The scenarios were based on markets with over 100 cases as of March 2, 2020.

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