Air India, the air carrier owned by the government is in serious debt. An amount to the tune of 52000 crores in which 22000 crores is aircraft loan while rest is working capital and other utilities. An inter-ministerial group was also constituted to look into the matter.
Vistara CEO in a recent press conference said that he is open to the offer to buy a stake in the air India once the disinvestment process starts as proposed by the government in principle. The statement by the Vistara, which is a joint venture between Tata group and Singapore airlines seems to hit the right note as the strong interest in the Air India.
While, it is evident that, it was the Tata which started the air India in 1932. Later the government acquired a 49% stake in the company. The NITI Aayog has a similar view as the finance ministry, both of them think that total privatization is the key to the revival of the Air India.
But the aviation ministry wishes to part with air India management but favours to keep a significant stake in the company. While it is worth noting that the issue of air India privatization has been going on for a decade. UPA government denied it and agreed to infuse additional capital to restructure their debt but nothing improved.
The Current government has agreed in principle to the process of disinvestment but how will that process continue will be decided by the inter-ministerial group.
The Dilemma of Debt
The loss-making body will have to look for ways to reduce its debt. While it owns many premium locations in the many cities, which can be utilized to for the process. The main aim of the group should be preparing a plan for the attractive offer for private investors.
As the Vistara CEO said, the brand air India is not dead but the company looks to be in serious problem. Recently, the air India CEO mentioned in his letter to the employees about the future of the Air India. He asked his team to perform otherwise they are bound to perish. The plan of disinvestment may be able to reduce a significant amount of debt from its portfolio but what really needs to done to bring back the profitability is, the radical reform of the management and structure of the company.
Still, air India controls a market share of around 13% but it has been reducing over the years as the market becomes competitive.
Future with the Privatization
The standard view to reducing the loss-making government bodies is the privatization but is it really an inclusive solution for the different companies in the different sectors, which are owned by the government.
But, the fact remains clear that we are yet to see any real reformative action from the company, which will reduce its debt. Can it continue thriving on the taxpayer’s money? What the future holds is in hands of time but the interest shown by private players is a good sign for the Air India.