Tuesday, July 09, 2019

Ahead of Air India sale, govt calls for impact study of Jet Airways’ closure

Ahead of the proposed sale of the loss-making Air India, an anxious ministry of civil aviation has called for an impact analysis of the closure of Jet Airways. Ernst & Young (EY), the advisors to the sale, which flopped the first time, has been tasked with assessing the chances of a success in the light of shutdown of Jet Airways.

The very poor appetite for Jet Airways surprised the government given the carrier was financially in a far better shape than Air India is today. Jet’s dues at close to `25,000 crore are smaller than Air India’s staggering `58,351 crore. Moreover, it enjoyed the biggest share of international traffic out of India of 13.5% and commanded a local share of 15%.

Although the government has transferred an amount of `29,464 crore to an SPV, lowering AI’s debt burden, investors may not be satisfied. This time around, the government intends to sell 100% rather than 76% but Air India’s large and expensive workforce — 27,000 employees at the end of December 2017 — could be a deal-breaker. Jet Airways had just 16,000 employees even though both airlines had fleets of roughly the same size with around 120 aircraft.

Adding to the government’s worries is the fact that Air India’s domestic market share has been consistently falling and plummeted to 11.8% in September last year. International traffic share was 10.4% in 2017-18 and has been declining for last few years. The national carrier has won bilateral flying rights with five countries — Dubai, Hong Kong, Qatar, Singapore and the UK — post the closure of Jet. In addition, it now has domestic slots for 22 flights, including Delhi-Bhopal, Bhopal-Pune, Delhi-Raipur, Delhi-Bengaluru, Delhi-Amritsar, Chennai-Bengaluru and Chennai-Ahmedabad, vacated by Jet Airways.
09/07/19 Arun Nayal/Financial Express

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