Today Modi government gave the approval to privatize beleaguered Air India. This is the initial step in the process which will witness the govt. offload an airline struggling to turn revenue in the face of growing competition from the low-cost rivals. In the highly competitive aviation market of India, Air India has long been struggling. This airline was given a bailout package in the year 2012 by the former UPA government of which it has so far received twenty-four thousand crore rupees. Meanwhile, various airlines have expressed interest in buying a stake in the airline, including SpiceJet and IndiGo. But interestingly another name has been added to that list is Tata Group, which incidentally started the airline. The central government had earlier proposed privatization of Air India because of its debt of Rs 52,000 crore.
Already the Department of Investment and Public Asset Management (DIPAM) has prepared a note and on that note, there are three options on the table and those are a full 100% sell-off, a 74% stake sale or retaining a 49% share in the airline.
But another problem is in the system from the union side. Expressing concerns about the uncertain fate of more than twenty-five thousand employees of this airline, the union representatives have also demanded that their salary dues should be cleared, if Air India is privatized,
Union Finance Minister Mr. Arun Jaitley said that last month the Modi government was looking to privatize the national carrier. While the Central government think-tank NITI Aayog and the Finance Ministry are in favor of an outright sale, the Civil Aviation Ministry is keen that the central government continues to remain a stakeholder in the airline after handing over the management to the private sector.
The Cabinet has also considered a proposal to clear up Air India’s liabilities by forming an SPV- Special Purpose Vehicle which will consider a portion of its non-aircraft debt along with its subsidiaries and assets.
Last month central government Aayog already had suggested a full disinvestment beginning with hiving off its profit-making subsidiaries. This airline has total liabilities of more than 60,000 crore rupees of which 52,000 crore is bank debt. It also four thousand crore is its annual interest outgo. The Air India is currently surviving on a govt. bailout package of 30 thousand crores. The quantum of divestment will be decided by a ministerial cabinet group. Meanwhile, Indigo, SpiceJet, and Tata group are the companies which have reportedly expressed their interest in buying a stake in Air India
Air India has 4 subsidiaries which include its MRO unit AIESL, ground handling arm AITSL AASL, which operates Alliance Air, and AICL which operates Air India Express. The Hotel Corporation of India is another subsidiary while it has a joint venture AISATS. The Hotel Corporation owns the Centaur Hotels.
