Government chalking out new turnaround plan for Air India; here’s how it proposes to reform airline

By: | Published: September 7, 2018 1:27 PM

The civil aviation ministry said in its representation to the Parliamentary Standing Committee for transport, tourism and culture last month that stake dilution in the Air India is not going to be happening any time soon.

Air India recently got government guarantee of Rs 2,100 crore.

The Ministry of Civil Aviation is in the process of charting out a turnaround plan for the loss-making airline Air India, which has a huge debt of about Rs 55,000 crore, to make the airline stand on its own feet and privatise it when macro conditions improve, according to a report by The Indian Express. Recently, civil aviation secretary RN Choubey said that the government has assured the airline Air India of Rs 2,100 crore in the form of guaranteed borrowing.

The new turnaround plan, which is expected to announced by the end of this month, will focus on organisational reform of Air India and will be different from the earlier one that focused on restructuring of the airline, official sources told the paper.

In 2012, the government had announced a financial restructuring plan (FRP) as part of the original turnaround plan for the beleaguered airline under which the capital loans of Air India were restructured to long-term debt.

According to a senior Air India official, one more outsider is expected to join the board of the company and the new turnaround plan will make the airline a board managed company.  Aditya Birla Group chairman and ITC chairman YC Deveshwar were roped in as independent directors on the board of the airline last month.

The civil aviation ministry said in its representation to the Parliamentary Standing Committee for transport, tourism and culture last month that stake dilution in the national airline is not going to be happening any time soon.

It may be noted that the government faced a major setback after it failed to attract any buyer for its controlling equity stake in the state-run airline at the end of the 31 May deadline. The disinvestment in Air India failed largely on account of the government not parting with the entire holding in the carrier, the high debt-levels and a high employee-to-aircraft ratio.

While speaking on the sidelines of the International Aviation Summit recently Choubey also said that the government is providing necessary support to Air India despite the plan in place to divest its holding in the airline, in order to avoid any erosion in the company’s value.

Air India is expected to incur a loss of over $2 billion in value in the ongoing financial year and next financial year, said aviation consultancy CAPA India in its mid-year aviation outlook for 2018-19. It further added that in the absence of full recapitalisation and a clear direction, Air India’s value will continue to erode, which will make future privatisation unlikely.

Air India competes with aggressive private sector carriers like SpiceJet, IndiGo and Jet Airways.

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