Air India To Be Privatised?Top Stories

June 01, 2017 11:38
Air India To Be Privatised?

Air India, was originally founded by J.R.D. Tata, but after the independence in the year 1947, 49% of the airline share was acquired by the Indian Government in the year 1948. Later, the company was renamed as Air India International Limited and also the domestic services of the company were transferred to the Indian Airlines as a part of restructuring.

On 23rd May 2001, the Ministry of Civil Aviation has charged Michael Mascarenhas, the then-managing director of Air India, with corruption. According to the reports by the ministry, the airlines has lost approximately 570 million (US$8.9 million) because of the extra commissions that Mascarenhas sanctioned and later, he has been suspended from the airline.

In May 2004, Air India has launched Air-India Express, which is a wholly owned low cost subsidiary connecting the cities in India with the Middle East and also Southeast Asia. In the year 2007, Air India and also Indian Airlines were merged under Air India Limited.

The combined loss of Air India and Indian Airlines in 2006–07 was 7.7 billion (US$120 million) and also after the merger, the loss went up to 72 billion (US$1.1 billion) by the March 2009.

In the year 2012, a study conducted by the Corporate Affairs Ministry has recommended that Air India should be privatised in part. As of 2016 February, Air India one of the largest carrier in India, placed in third, after the IndiGo and also Jet Airways with the market share of 15.4%.

Finance minister Arun Jaitley and also Niti Aayog may be in favour of disinvesting in the loss-ridden Air India, but finding a strategic investor for Air India may not be easy, said the civil aviation minister Ashok Gajapathi Raju, on Wednesday, 30th May, 2017.

"There are hardly any bakras around, so to get one is difficult and businessmen are businessmen. There are limitations. One thing is for sure, the taxpayer's money cannot be committed for eternity. So, that is one problem. Failures are there on the financial front, so, there are problems and these will be attended to," Ashok Gajapathi Raju told to a TV channel.

The plain talk of Raju came out when the TV channel has asked him for a comment on the Niti Aayog's suggestion that half of Air India's total debt of 52,000 Crore to be written off, making the airline attractive enough to find a buyer. Gajapathi Raju has always stated that Air India's financials are bad and also who will buy the airline in the current form. Another top aviation ministry source said that Air India's divestment is going to be a challenge. "There are very big issues that need to be addressed like how to arrive at the correct valuation and how will the transaction take place?" said the source.

"It cannot be business as usual at AI. The earlier (UPA) government's plans for financial restructuring and turnaround have not yielded the desired result. We no longer have the luxury of sitting on a decision on AI and something will have to be done fast,"  added the source.

Several Air India insiders feel that the best option for Air India could be returning to its original founder Tata, especially as the Tata-Singapore Airlines, JV airline Vistara is preparing to start up the long overseas routes. Air India has wide body planes, pilots, and also slots at the foreign airports, said the airline insider.

Qatar Airways has also been planning to start an airline in India and also has deep pockets. Raju said that he did not want to speculate on the possible buyers. "I am open to all ideas, I mentioned. I am not doing any speculation as of now. These airlines which you talked about, European basically, which were owned by the governments and these are facts, they have sold out and generally others have bought shares in it and they are going ahead. So, all options are there. No option is ruled out, no option as of date is preferred. Let us see what comes out of it."

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Mrudula Duddempudi.

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