Revival package for Air India

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Revival package for Air India

Revival package for Air India, Four pronged strategy by Government of India, Current Affairs 2018

 

As the Narendra Modi government’s term nears the end, it has officially given up on its plans to privatise Air India (AI) for now, after no buyers turned up earlier this year.

Instead, the government has announced a ‘revival’ plan, which includes more ‘autonomy’ for the ailing national carrier that was deliberately dunked into debt and made sick.

But the government’s measly offering to AI is unlikely to turn around the fortunes of the public-sector airline, which was an undisputed market leader not too long ago, especially given imposition of the condition that AI should not seek financial support from the government after 2018-19.

And while the government is not currently ‘divesting’ AI, it is divesting AI literally. Plans are afoot to strip it of its assets (including real estate and even artefacts) and subsidiaries, setting the stage for its eventual divestment under the next government. So, the reprieve is temporary.

But let us first recap the failed attempt to sell off AI.

A Sale That Failed

On March 28, 2018, the Bharatiya Janata Party-led National Democratic Alliance government announced the sale of 76% equity share capital of AI held by the Government of India — along with 100% equity stake in AI’s subsidiary, Air India Express Limited, as well as the 50% equity stake in joint venture AISATS that Air India has.

But the offer failed to attract private players, mainly due to AI’s huge debt burden of around Rs 50,000-55,000 crore — despite the Modi government sweetening the deal for prospective buyers by vowing to bear 50% of the debt through hiving off non-core real estate assets and other businesses, not integral to the core airline business, into a Special Purpose Vehicle (SPV) to be owned by the GoI.

These other subsidiary businesses include the Air India Engineering Services, Air India Air Transport Services, Airline Allied Services, and Hotel Corporation of India.

This — transferring half the burden into an SPV — is also part of the government’s turnaround plan for AI, but more on that in a bit.

 

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