Wednesday, November 15, 2017

Why privatisation of Air India seems to be the only solution to revive the ailing national carrier

Air India, was the Maharaja in scheduled air transport service and domestic scheduled passenger airline until it started facing severe competition from private airlines such as Indigo, Spice Jet, Jet Airways etc. Air India used to be the largest international carrier from India, controlling 14.6% of the domestic passenger market. However, with private airlines expanding their capacity, Air India’s domestic market share dropped to about 13% as of March, 2017. Currently, Air India is burdened with a debt of about 52,000 crores and has salary arrears of approximately Rs. 1,200 crores accrued from the year 2012. The salary arrears are to be paid to approximately 27,000 odd staff of Air India that includes pilots and cabin crew. Due to unsustainable debts suffered by the airline company, the Government has decided towards disinvestment and privatization of Air India, which seems to be the only solution to revive the ailing national carrier.
Seeking Disinvestment of Air India– Government options available
For the purpose of disinvestment of Air India, various options were considered by the Government, such as hiving off certain assets, a possible demerger, strategic disinvestment of three profit-making subsidiaries. Amongst the above options, the Government also initially contemplated effecting the disinvestment by selling either its entire 100% stake or 74% stake or 51% stake to a third party. A parliamentary panel had sought details from the Government on giving in-principal approval to divest its stake in Air India. On June 28, 2017, the Cabinet Committee on Economic Affairs gave their in-principle approval for considering strategic disinvestment of Air India and five of its subsidiaries.
Pursuant to the in-principle approval, the ministry received two proposals, one each for the airline’s international operations and for its assets from Bird Group and IndiGo. Tata Group (which originally established the airline in the early 1930s) has shown an interest in buying the government stake in Air India. In September, 2017, the Government invited bids to appoint financial and legal advisors for the disinvestment process and also invited applications for appointing an asset valuer for Air India as well as its subsidiaries and overseas offices. Currently the Government has received bids from six consulting companies and investment banks for the mandate of advising it on the divestment of its stake in Air India.
14/11/17 Financial Express
To Read the News in full at Source, Click the Headline

0 comments:

Post a Comment