The Air India Disinvestment Saga: A Primer

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Air India’s total debt now stands at around 43,000 crore.

On September 15, Tata Sons and SpiceJet Chairman Ajay Singh officially presented their final offer for the takeover of Indian airline Air India, raising hopes that the divestment process from the loss-making airline will be completed during this time. exercise. Besides 100 percent of its stake in the state-owned national airline, the potential buyer will get 100 percent from AI Express – a low-cost airline – and 50 percent from Air India SATS Airport Services. The idea of ​​the government selling off its stake in Air India – the flying “maharajah” that once was among Asia’s biggest airlines – is not of recent origin. Here is a 10-point introduction to the Air India saga

  1. Attempts to privatize Air India began during the third term of Atal Bihari Vajpayee’s government (1999-2004). In May 2000, the cabinet decided to sell 60 percent of the government’s shares in the carrier. However, the process collapsed in early 2002, after the Singapore Airlines and Tata Sons consortium collapsed and the other bidder – Hindujas – also withdrew from the race.

  2. In 2007, the Indian government merged Indian Airlines – the national carrier – and Air India. While the raison d’être of the merger of the two entities was to achieve economies of scale and reduce losses, human resource issues plagued the merged entity. Experts believe that the merger has played a major role in Air India’s continuing problems. Since the merger of the two entities in 2007, Air India has suffered heavy losses every year. As of March 31, 2020, the accumulated losses amounted to over Rs 70,000 crore.

  3. In April 2012, the government led by Manmohan Singh announced a bailout of more than Rs 30,000 crore for a period of 10 years to keep the beleaguered national carrier afloat.

  4. In 2012, the Ministry of Civil Aviation released a report drafted by a committee headed by Judge Dharmadhikari. The committee was formed to examine the human resources issues that emerged after the merger.

  5. Among the many recommendations were the formation of departmental promotion committees to ensure a fair promotion process and the maintenance of the pay scale in accordance with Ministry of Public Enterprises standards for senior executives and industry standards for pilots. , cabin crew and engineers. The government has also formed a committee to implement the recommendations.

  6. A 2013 report from CAPA – Center for Aviation sums up the issues that continue to plague the airline, even now. “Low productivity, high costs, poor staff morale, significant unresolved human resource issues, and an unsustainable business model,” the report notes.

  7. In mid-2012, in the midst of a prolonged staff strike, then Civil Aviation Minister Ajit Singh sparked speculation about the privatization of Air India. In October 2013, Mr. Singh told a private broadcaster that “privatization is the only way to save Air India”. However, nothing happened during his tenure.

  8. According to media reports, Air India’s total debt now stands at around Rs 43,000 crore. Of this amount, 22,000 crore rupees will also be transferred to Air India Asset Holding Limited (AIAHL), which plays a key role in the divestment process: making the indebted airline attractive to potential buyers by holding part of the debt. and not -the main assets of the Air India group.

  9. The second big push for privatization came during Prime Minister Narendra Modi’s first term. In June 2017, the cabinet approved “in principle” a plan to privatize the airline. However, the government failed to attract any bidders for its 76% stake in the carrier in 2018.

  10. The government’s latest divestment attempt began in December 2020, when it solicited an expression of interest (EoI) from potential buyers. An EoI is an informal statement that an entity is interested in purchasing a business.

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