Sunday, July 09, 2017

Air India's privatisation is the biggest overhaul for Indian aviation

The Indian government's plan to privatise the struggling flag carrier Air India could help the country's aviation sector to soar.

A group of ministers has been tasked with determining the finer details of the process, after India's cabinet recently approved the privatisation of loss-making Air India “in principle”.

“This is a long overdue decision and will be one of the most significant structural reforms in Indian aviation,” according to a research note by analysts at Capa India, an aviation advisory and research firm.

Air India is laden with debts, totalling about 500 billion rupees (Dh28.36bn). The airline has long struggled and it is widely seen as a bold move by the prime minister Narendra Modi's government to have taken the decision to sell off a stake in its national airline. Capa warns that it is not going to be an easy journey and that the government would have to write-off billions of dollars of debt in order “to make Air India an attractive investment opportunity for investors”.

“We see this government being prepared to take such a decisive step in the interests of cutting its losses and creating a stronger Air India and a healthier aviation industry. If the balance sheet is cleaned up in this way, significant interest can be expected in the carrier.”

India's aviation sector is expanding amid rising incomes, as more Indians opt to fly.

India is one of the world's fastest-growing aviation markets. The number of passengers travelling by air within India last year surged by 23 per cent compared to the previous year to reach close to 100 million. But it is also a hugely competitive, indeed cut-throat market with several low-cost carriers operating alongside full-service airlines such as Air India in the battle for passengers.
09/07/17 Rebecca Bundhun/The National