Cabinet gives OK to strategic sale of Air India, panel to study various options

The much-awaited Cabinet approval for sale of government’s stake in Air India came today with the Narendra Modi-led team of ministers deciding to set up a committee to explore various options including strategic divestment of the loss-making airline and its five subsidiaries.

Finance Minister Arun Jaitley will head the inter-ministerial panel. The decision was based on the recommendations of Niti Aayog.

The committee will consider the quantum of disinvestment to be made the “universe of bidders”, according to a government press release.

According to media reports, Tata Sons officials led by Chairman N. Chandrasekaran have already met top officials in the aviation ministry to express their interest in buying the airline.

Tata Sons has stakes in Air Vistara and AirAsia India.

The committee will also study and suggest ways to treat the unsustainable debt of Air India; hiving off certain assets to a shell company and demerger and strategic divestment of the airline’s profit-making subsidiaries.

Air India Transport Services, Hotel Corporation of India, Air India Charters, Air India Engineering Services and Airlines Allied Services are the five subsidiaries of Air India.

The airline, surviving on a Rs. 30,231-crore government bailout package, has accumulated losses of around Rs. 52,000 crores and as much debt. The package, approved by the previous government in 2012, called for staggered equity infusion over nine years.

It has so far received Rs. 23,993 crores under the package.

The airline reported an operating profit of Rs. 105 crores in 2015-16 though this was contested by Comptroller and Auditor General which said it was actually an operating loss of Rs. 321 crores. The national carrier hasn’t made a net profit in at least a decade.

Air India has a 14 percent market share in the domestic market and 17 percent share of the overseas traffic flying to and from India.

Clearly indicating his ministry’s views on the issue, Jaitley had recently said in a TV interview that the government should have ideally exited the airline 10 years ago and that he saw no reason why the private sector couldn’t be allowed to handle the remaining passengers in the domestic market when it was already managing the 86 percent.

Privatization won’t be an easy task for the union-plagued airline.

As is the practice, the government will most probably appoint consultants to prepare a detailed study of the airline, its assets and liabilities, its fleet and their lease agreements and the routes.

The airline owns prime properties in Delhi, Mumbai and several national and international cities where it not only runs its operations but also houses its employees.