The Air India Disinvestment Saga: A Primer

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

On September 15, Tata Sons and SpiceJet Chairman Ajay Singh officially submitted their final bid to buy India’s flag carrier Air India, raising hopes that the disinvestment process of the loss-making airline will be completed in this financial year. Besides 100 per cent of its stake in the state-owned national airline, the potential buyer will get Air India’s 100 per cent of AI Express – a low-cost airline – and 50 percent of Air India SATS Airport Services. The idea of government selling its stakes in Air India – The flying ‘maharajah’ which was once among Asia’s top-most airlines – is not of recent origin. Following is a 10-point primer on the Air India saga

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

  2. In 2007, the government of India merged Indian Airlines – the domestic carrier – and Air India. While the rationale behind merging the two entities was to achieve economies of scale and cut losses, human resources issues plagued the merged entity. Experts believe that the merger has played a major role in Air India’s continuous troubles. Ever since the two entities merged in 2007, Air India has suffered heavy losses every year. As of March 31, 2020, the accumulated losses stood at over Rs 70,000 crore.

  3. In April 2012, the Manmohan Singh-led government announced a bailout package of over Rs 30,000 crore for a 10-year period to keep the beleaguered national carrier afloat.

  4. In 2012, the Ministry of Civil Aviation published a report compiled by a committee headed by Justice Dharmadhikari. The committee was formed to look into 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 keeping the pay scale as per Department of Public Enterprises’ norms for the executive cadre, and as per industry norms for pilots, cabin crews and engineers. The government also formed a committee to implement the recommendations.

  6. A 2013 report by CAPA – Centre 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 unviable business model,” the report noted.

  7. In mid-2012, amid a prolonged strike by the staff, then Civil Aviation Minister Ajit Singh sparked speculations of Air India’s privatisation. In October 2013, Mr Singh told a private broadcaster that “privatisation is the only way to save Air India”. However, nothing happened during his term.

  8. According to media reports, Air India’s total debt now stands at about Rs 43,000 crore. Of this, Rs 22,000 crore will also be transferred to the Air India Asset Holding Limited (AIAHL), which has a key role in the disinvestment process: Making the debt-ridden airline attractive for potential buyers by holding a part of the debt and non-core assets of the Air India group.

  9. The second major push for a privatization took place during the first term of Prime Minister Narendra Modi. In June 2017, the cabinet “in-principle’ approved a plan to privatise the airline. However, the government failed to attract any bidder for its 76 per cent stake in the carrier in 2018.

  10. The government’s latest disinvestment attempt started in December 2020, when it sought an Expression of Interest (EoI) from potential buyers. An EoI is an informal declaration that an entity is interested in buying a business.

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