Monday, September 02, 2019

Air India losses to end: Maharaja may break even this year after a decade, disinvestment may get easier

The state-run national carrier Air India’s divestment plans may spell success this time as the airline is likely to break even or run with small loss at the net level in FY20, for the first time in over a decade. If the government addresses issues related to treatment of debt and labour flexibility, the airline may become lucrative for prospective bidders, according to a recent report by aviation consultancy firm CAPA India. Also, while other airlines are expected to report record profits, the cash-strapped airline is expected to start making money. “The favourable market conditions represent a unique opportunity for a structural re-set of the national carrier, which Air India must take advantage,” CAPA said. The airline could leverage opportunities in the international sector as the domestic market will remain competitive, CAPA added.

Air India has long been on the government radar for privatization and it breaking even could also act as a positive foundation for its disinvestment. Also, Jet Airways grounding could serve as a catalyst in Air India divestment considering the better market dynamics after the Naresh Goyal-founded airline’s grounding in April 2019. Recently, an Air India spokesperson had also said that the airline is inching towards better profit. “Our financial performance, however, this fiscal is very good and we are moving towards a healthy operating profit. The airline despite its legacy issues is performing very well,” news agency PTI quoted the person as saying, earlier in August.

Recently, Civil Aviation Minister Hardeep Singh Puri reaffirmed the government’s plan of Air India divestment and said that the “government is determined to privatise Air India”. The minister reiterated that it is not the government’s business to run airlines. The Maharaja must go to a private player, he added.
02/09/19 Prachi Gupta/Financial Express

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