With the Indian government drawing closer to the privatisation of its debt-laden flag carrier Air India, the move could signal a boost for the airline and the aviation market of Asia's third largest economy.
“Under privatisation, a new stronger player which has more commercial focus and is more efficient in its operations will probably perk up the entire market,” says Paramprit Bakshi, the vice president at Capa India, an aviation advisory. “Airlines will have to up their game.”
The airline - sometimes referred to as “the maharajah” because of its endearing, portly mascot - is burdened with debts of close to $8 billion. Taxpayers have been keeping the carrier afloat, as it guzzles hundreds of millions of dollars of their money each year.
An Air India spokesman said via email the company had “no comments on this issue”.
There is some optimism among experts that a suitable bidder will step in and be able to turn around the business, which lost more than 36bn Indian rupees (Dh1.98bn) in the financial year to the end of March 2017.
“The brightest spot is the consumption story of the aviation industry in India, with high growth rates like you've never seen,” says Sanjiv Bhasin, the executive vice president of markets and corporate affairs at IIFL, a finance and investment services company headquartered in Mumbai. “I definitely think there would be a very good suitor, despite the hurdles that have to be cleared such as the debt. The government ran Air India as a white elephant, but the fundamentals of the business are extremely strong.”
He adds that the airline “can be a very profitable company in the future” following privatisation.
It is seen as a bold move by the Indian government to sell off a stake in the airline. New Delhi announced the plan last year, admitting that funds could be better spent on areas including education. But it has not been an easy journey. Last week, India's ministry of civil aviation revealed plans to extend the deadline to receive initial bids for the carrier from May 14 to May 31, with plans to announce the qualified bidder on June 15.
Further details were revealed in March to sell off a 76 per cent stake in Air India. As part of the deal, the successful bidder would take on more than $5bn of the carrier's debt. Following this, India's largest airline IndiGo, which had earlier expressed keen interest, dropped out of the race.
Last month, Jet Airways - in which Etihad Airways has a 24 per cent stake - also announced it would not be bidding. Meanwhile, other companies have gone quiet, with none expressing an open interest in buying into the loss-making airline.
05/05/18 Rebecca Bundhun/The National
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“Under privatisation, a new stronger player which has more commercial focus and is more efficient in its operations will probably perk up the entire market,” says Paramprit Bakshi, the vice president at Capa India, an aviation advisory. “Airlines will have to up their game.”
The airline - sometimes referred to as “the maharajah” because of its endearing, portly mascot - is burdened with debts of close to $8 billion. Taxpayers have been keeping the carrier afloat, as it guzzles hundreds of millions of dollars of their money each year.
An Air India spokesman said via email the company had “no comments on this issue”.
There is some optimism among experts that a suitable bidder will step in and be able to turn around the business, which lost more than 36bn Indian rupees (Dh1.98bn) in the financial year to the end of March 2017.
“The brightest spot is the consumption story of the aviation industry in India, with high growth rates like you've never seen,” says Sanjiv Bhasin, the executive vice president of markets and corporate affairs at IIFL, a finance and investment services company headquartered in Mumbai. “I definitely think there would be a very good suitor, despite the hurdles that have to be cleared such as the debt. The government ran Air India as a white elephant, but the fundamentals of the business are extremely strong.”
He adds that the airline “can be a very profitable company in the future” following privatisation.
It is seen as a bold move by the Indian government to sell off a stake in the airline. New Delhi announced the plan last year, admitting that funds could be better spent on areas including education. But it has not been an easy journey. Last week, India's ministry of civil aviation revealed plans to extend the deadline to receive initial bids for the carrier from May 14 to May 31, with plans to announce the qualified bidder on June 15.
Further details were revealed in March to sell off a 76 per cent stake in Air India. As part of the deal, the successful bidder would take on more than $5bn of the carrier's debt. Following this, India's largest airline IndiGo, which had earlier expressed keen interest, dropped out of the race.
Last month, Jet Airways - in which Etihad Airways has a 24 per cent stake - also announced it would not be bidding. Meanwhile, other companies have gone quiet, with none expressing an open interest in buying into the loss-making airline.
05/05/18 Rebecca Bundhun/The National
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