In the end Government of India's plans to divest Air India did not take off. That there were no bidders is no surprise. Some clear reasons are obvious as to why bidders finally did not go ahead.
Firstly, the 76 per cent stake sale of Air India was to be bought bundled with its five subsidiaries with the Government of India retaining 24 per cent of direct stake in Air India.
Centre for Asia Pacific Aviation (CAPA) in a report highlighted the lack of confidence amongst bidders because of the government stake. With the government holding nearly a quarter of the airline, interested parties feared political interference and government prying.
Secondly, Air India is heavily debt-laden and regularly incurs huge losses. The total debt including current liabilities stood at Rs 33,392 crore as on March 31, 2017. By March 2018, the figure crossed Rs. 50,000 crore as reported by MoneyControl.
During 2016-17, Air India reported a net loss of Rs 5,765.17 crore.
"Debt level proposed to be retained in business is very high compared to business earnings. What is GOI/AI expectation of cash shortfall over the next two years?" a bidder asked the civil aviation ministry in a clarification document.
Despite the enormous investment flowing from the bidder, it may take several years to turn the carrier around.
CAPA further estimates that over the next two years, Air India could be headed for cumulative losses of $1.5-2 billion if the divestment process is not executed successfully.
Reportedly, the lack of transparency on the employee-retention clause by Air India may have also hindered bidders. A number of unions protested against Air India divestment. Bidders weren't ready to deal with staff that they couldn't lay off.
In March, Business Standard quoted an official as saying: "Employees cannot be asked to resign. While the private player will be given full independence in taking strategic decisions, employees will be asked to be retained for one year."
Air India, including its subsidiaries, has more than 20,000 employees on its payroll.
Air India also fails to top the market share or passenger load in domestic operations. As per a Directorate General of Civil Aviation report for April 2018, Indigo retained the highest market share of schedules domestic airlines at 39.7 per cent carrying 1.34 crore passengers followed by Jet Airways at 14.7 per cent. Air India holds only 13.3 per cent market share with just 45.06 lakh passenger load.
The traffic data report updated by airlines for the month shows maximum complaints against Air India at 263 per 10,000 passengers carried, which have not entirely been addressed by the airline.
04/06/18 Upasana Jain/India Today
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Firstly, the 76 per cent stake sale of Air India was to be bought bundled with its five subsidiaries with the Government of India retaining 24 per cent of direct stake in Air India.
Centre for Asia Pacific Aviation (CAPA) in a report highlighted the lack of confidence amongst bidders because of the government stake. With the government holding nearly a quarter of the airline, interested parties feared political interference and government prying.
Secondly, Air India is heavily debt-laden and regularly incurs huge losses. The total debt including current liabilities stood at Rs 33,392 crore as on March 31, 2017. By March 2018, the figure crossed Rs. 50,000 crore as reported by MoneyControl.
During 2016-17, Air India reported a net loss of Rs 5,765.17 crore.
"Debt level proposed to be retained in business is very high compared to business earnings. What is GOI/AI expectation of cash shortfall over the next two years?" a bidder asked the civil aviation ministry in a clarification document.
Despite the enormous investment flowing from the bidder, it may take several years to turn the carrier around.
CAPA further estimates that over the next two years, Air India could be headed for cumulative losses of $1.5-2 billion if the divestment process is not executed successfully.
Reportedly, the lack of transparency on the employee-retention clause by Air India may have also hindered bidders. A number of unions protested against Air India divestment. Bidders weren't ready to deal with staff that they couldn't lay off.
In March, Business Standard quoted an official as saying: "Employees cannot be asked to resign. While the private player will be given full independence in taking strategic decisions, employees will be asked to be retained for one year."
Air India, including its subsidiaries, has more than 20,000 employees on its payroll.
Air India also fails to top the market share or passenger load in domestic operations. As per a Directorate General of Civil Aviation report for April 2018, Indigo retained the highest market share of schedules domestic airlines at 39.7 per cent carrying 1.34 crore passengers followed by Jet Airways at 14.7 per cent. Air India holds only 13.3 per cent market share with just 45.06 lakh passenger load.
The traffic data report updated by airlines for the month shows maximum complaints against Air India at 263 per 10,000 passengers carried, which have not entirely been addressed by the airline.
04/06/18 Upasana Jain/India Today
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