Govt looking to exit debt-laden Air India: FM

29 May 2017


The government is looking at divesting its stake in Air India and the civil aviation ministry is exploring all possibilities, including the induction of a strategic partner, to exit the ailing national carrier, finance minister Arun Jaitley said, in the first clear indication of Air India going private.

Air India, once the only domestic airline, currently has a 14 per cent market share while the private carriers hold the remaining 86 per cent of the air passenger market. At the same time, the state-owned carrier is sitting on a Rs50,000 crore accumulated debt that it is not even capable of servicing.

"Today they have a market share of 14 per cent and a debt of Rs50,000 crore. Your money does not go into private sector airlines such as Indigo, SpiceJet, Go Air, Jet Airways then why should you put Rs50,000 crore in running Air India? Government money means your money. This money can be used for education.  And if 86per  cent of flying can be handled by private sector, so it can also handle 100 per cent," Jaitley said during a panel discussion on Doordarshan News.

''There are many private airlines like Jet Airways, IndiGo, GoAir. If 86 per cent of the aviation market can be handled by the private sector, then 100 per cent can also be handled by the private sector,'' Jaitley told DD News.

Jaitley said the government is in favour of exiting Air India totally if a suitable investor is available. ''Its valuation of aircraft will be at Rs 20,000-25,000 crore. The civil aviation ministry is exploring all possibilities,'' he added.

According to Directorate General of Civil Aviation, by December 2016, Air India's domestic market share measured by the total number of passenger seats sold has dropped to 14.1 per cent, making it the third largest behind market leader Indigo at 39.8 and Jet Airways at 15.5 per cent.

''When I briefly worked as the minister for civil aviation in the Atal Bihari Vajpayee government, I had signed on Air India's file asking for its total disinvestment'', he said, adding that the government has no business to run an airline.

During a panel discussion aired by national broadcaster Doordarshan on Saturday, Jaitley said he had first proposed disinvestment in Air India when he was disinvestment minister in 1999 in the government of Prime Minister Atal Bihari Vajpayee.

''As far as Air India is concerned, it's a very difficult question. When I was the disinvestment minister in 1999-2000, I had said please disinvest Air India, otherwise there will be nothing left to disinvest. This was some 18 years back," Jaitley said in response to a question.

''Disinvestment is always the art of the possible,'' Jaitley said. "We will do so now also. Individual units can go in the direction of privatisation. There is a possibility. Some have been identified."

Air India, which has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations, could be the next.

While the airline remains the single biggest international carrier from India with a 17 per cent market share, its share of the domestic passenger market has eroded over time as private airlines expanded capacity.

But, now several of the private airlines, including Vistara launched by Tata Sons in collaboration with Singapore Airlines, is also gearing up to start international flights from next year.

The airline has so far received Rs23,993 crore of the Rs30,231 crore equity infusion promised by the government under a financial restructuring plan introduced in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore in the previous year.

The Economic Survey 2017 had also recommended this year that government should privatise Air India.

With the Indian aviation market poised for rapid growth over the next 10-15 years, Jaitley said, Air India needs to offload its debt burden to make a turn around.

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