Friday, July 28, 2017

Selling the Maharaja: Why it is important to find the right buyer for Air India

On June 28, the Cabinet Committee on Economic Affairs finally gave its ‘in-principle’ approval for considering the strategic disinvestment of Air India (AI) and five of its subsidiaries -- Air India Express, Alliance Air, Hotel Corporation of India, AIATSL and AIESL.
Ratan Tata, possibly in alliance with Singapore Airlines, IndiGo and Qatar Airlines are said to be potential buyers.
According to media reports, IndiGo has shown interest in the main airline and just one of its subsidiaries – Air India Express. This is interesting because out of the whole pack only these companies have reported improved financial performance last fiscal.
While Air India could show a nominal operational profit and a narrower net loss compared to the previous fiscal, Air India Express could even show a net profit, though lower than what was reported in 2015-16, according to a written reply in Lok Sabha on Thursday. Hotel Corporation of India, AI Engineering Services, Alliance Air continue to remain loss making in 2016-17.
Divestment of Air India had been a herculean task for the government. While the airline has assets in terms of routes, international airport slots and bilateral flying rights and owns aircraft, it is also sitting on a huge debt pile of around Rs 50,000 crore, out of which Rs 33,000 crore is due to working capital loans.  Any potential investor will have to deal that.
The national carrier is not only losing domestic market share to private airlines, but has been surviving on government grants for the last many years.
According to reports, there have been talks of the government writing off a large part of the debt or even the entire thing. However, this would not be an easy decision.
28/07/17 Times Now