The news that the Indian government is seeking to sell all or part of ailing Air India did not come as a surprise. Not when the airline announced earlier this week that it would stop serving meals with meat on flights within India to save money. That announcement was attacked as both discriminatory (most of India’s Muslims eat meat, many of the Hindu majority do not) and a drop in the bucket considering Air India’s $8 billion debt. A former state minister said that the savings from this measure (estimated at $1.2 million annually) might return Air India to full financial health in “5000 years.”
Although Air India has been operating for 85 years, most creditors would balk at a 5000-year payback plan. After all, the airline has not been profitable for at least ten years, when it merged with Indian Airlines. And for irritated Indians, the accumulated $8 billion debt is only part of the problem with Air India. The airline continues to lose money, has a high cost structure, and its unions have a history of work stoppages to address work issues.
While US airlines like Southwest and Delta are now ‘hot stocks’, up respectively 25% and 11%, Air India isn’t going to be an IPO soon. Since 2012, the Indian government has pumped $3.6 billion into keeping the airline going.
Kanu Gohain, a former chief of India’s Directorate General of Civil Aviation, told Bloomberg, “Taxpayer money has been going to this organization to feed inefficiency and incompetency. That’s the biggest liability.”
The government of Prime Minister Modi hopes to evaluate the assets of Air India (it has six subsidiaries and owns numerous pieces of real estate, including two hotels) and start selling all or part of the airline by 2018. The current privatization effort is hardly the first try by an Indian government. An attempt twenty years ago foundered on political and labor opposition, as this effort may end as well. A union representing 2500 of the carrier’s 40,000 employees has already expressed opposition to any sale.
13/07/17 Michael Goldstein/Forbes
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