Turbulence may continue in Air India for many years!

Rohit Chandavarkar
Friday, 12 January 2018

“At the end of TAP period, the government may evaluate the financial and performance status of Air India and take a decision accordingly,” the panel said.

Can India’s national carrier Air India be saved and revived? This is the big question being discussed in Indian aviation industry today. Days after the government announced that Air India will be allowed to accept 49% foreign direct investment, now, there is a debate about whether some foreign carrier will actually be interested in coming and becoming a minority stakeholder in a company which has Rs 51,000 crore debt!

Why should any foreign carrier come to take a stake in Air India if they cannot control it completely is the question critics ask while supporters of government’s decision on the issue say that Air India has large assets which are unique and those can be of great benefit. It is well-known that dishonest politicians and bureaucrats with their vested interests have ruined Air India and brought it to its current state but the question is can it be saved or revived ever in the future?

Months after the government initiated a process for strategic disinvestment of Air India, a Parliamentary panel concluded that this wasn’t a right time to privatise the national carrier and it should be given at least five years to revive. The Parliamentary panel in its report concluded that the Centre should review its decision to privatise the state-run airline and explore the possibility of ‘an alternative to disinvestment of our national carrier which is our national pride’. However, the government has gone ahead with its plans to invite FDI.

The government’s premier policy advisory body NITI Aayog in its report on Air India had earlier made it clear that further financial support for the loss making airline was not viable. However, the Parliamentary committee argued that as per the turnaround plan, the airline should be given time till 2022 to revive.

The Turnaround Plan (TAP) was approved by the previous United Progressive Alliance government. Under the plan, Air India was to receive a bailout package of up to Rs 30,231 crore for a period of 10 years, starting in 2012. 

“At the end of TAP period, the government may evaluate the financial and performance status of Air India and take a decision accordingly,” the panel said. As on 30 September last year, Air India’s total outstanding loans stood at Rs 51,890 crore. Earlier this month, the government informed the Rajya Sabha that the national carrier’s projected net loss for 2017-18 was estimated at over Rs. 3,500 crores, less than the provisional figure for 2016-17. In 2016-17, the airline had a net loss of 

Rs 3,643 crore and the operating profit was Rs 215 crore.

As per latest figures tabled in Parliament, the airline is projected to increase its operating profit to Rs 531 crore in 2017-18. The panel perhaps has taken this operating profit into consideration to say that the committee ‘strongly feels that it will not be appropriate at this stage to disinvest when Air India has started earning profit from its operations’.

The government has already started the process of privatisation of the national carrier. Last year in June, the Cabinet Committee on Economic Affairs gave an in-principle approval for considering strategic disinvestment of Air India and its five subsidiaries and constitution of Air India Specific Alternative Mechanism to guide the process of strategic disinvestment. Now, it remains to be seen if any foreign investor or a carrier finds the proposal attractive enough and comes to participate in this. Everybody in the aviation industry knows that it’s going to be a flight full of turbulence!

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