As speculations fly on Air India divestment, Aviation Minister says all options open on carrier

The Civil Aviation Ministry is keeping all options open on reviving Air India, Cabinet Minister P Ashok Gajapathi Raju said on Tuesday.

The Aviation Minister’s statement assumes significance on the back of Finance Minister Arun Jaitley recent remarks that the government was open to divesting its stake in the loss-making airline. Jaitley had said that if 86-87 percent of the market belonged to the private carriers, he saw no problem in 100 percent being run by it.

“Niti Aayog has suggested to make Air India strong and viable. All courses of action are being examined. We have not closed any option,” Raju said at a press conference held to enumerate the achievements of the first three years of the Narendra Modi government.

Air India has become a bottomless pit with thousands of crores of taxpayers’ money going into keeping the highly unionised airline afloat in the competitive sector. In such a scenario, selling the airline will not be an easy task for the government.

To make matters worse, the Central Bureau of Investigation has begun investigating the 2005 purchase of 27 Boeing B787 Dreamliner planes by the national carrier, not a pleasant thought for an incoming buyer.

There was also a three-year delay in delivery of planes by the US company. While Air India subsequently asked for a compensation of around USD 700 million for the delays, the compensation the plane manufacturer eventually paid Air India, if at all it did, was never revealed.

Air India, which has a debt of Rs 50,000 crore, has not made a net profit for at least 10 years. Half of the debt is on account of aircraft valuation. The airline claimed to have made an operating profit of Rs 105 crore in 2015-16 but a report by the central auditor debunked that, saying the state-owned airline actually made a net loss of Rs 321.4 crore.

According to reports, banks recently declined a request by the airline to convert close to Rs 9,000 crore of debt into equity. The airline trails IndiGo, SpiceJet and Jet Airways with a 13 percent market share. It has fleet of 114, with a mix of Boeing and Airbus aircraft.

The government has invested Rs 5,765 crore in 2015-17 period and plans to put another Rs 1,800 crore into Air India in the ongoing financial year as part of its turnaround plan for the airline. This will go into funding the airline’s 2017-18 capital expenditure plan of Rs 2,308 crore. The rest of the capex will be funded from internal resources (Rs 290 crore) and loans (Rs 218 crore).