Air India privatisation moves ahead
The Indian government has launched a new plan to sell off national carrier Air India, but it still faces an uphill climb to convince investors, foreign or domestic, to take over the bloated and debt-ridden airline.
The government’s previous attempt to sell the airline failed in 2018, largely due to the amount of debt a buyer would have to take on and because the government had planned to retain a 24 percent interest in the airline following the sale.
The new plan does away with that government holding and trims the amount of debt any buyer would take on to US$3.3 billion from the 2018 amount of US$5.1 billion. Air India’s total debt load is about US$8 billion, according to Indian government officials and it’s unclear what will happen to the debt not taken over by a buyer.
Another hurdle to any sale is that the Expression of Interest published by the government mandates that control of the airline must remain within India, meaning a foreign airline can only buy 49 percent of Air India. Analysts say this remains a significant barrier to any sale.
Other analysts also point out the selling the whole of Air India, including its ground operations, MRO, and other associated companies, may be too much to take on at one time and that selling off parts of the airline may make more sense.
The divestment of Air India has been a key agenda of the Indian government, which has been trying to offload loss-making companies and improve its balance sheet in the face of the slowest economic growth in a decade.
Another problem facing any potential investor is that Air India has about 14,000-plus employees and any cost-cutting measures a buyer hoped to implement could face serious challenges from labour unions and government officials beholden to those unions.