Air India in Dire Straits.

By David Hopwood | December 2, 2019

The day of the state-owned carrier has long since passed, but some governments seem slower than others to get the message.

We’ve reported on a similar shambles at South African Airways and while the biggest airline in Africa -Ethiopian- is privatising, on the other side of the Indian Ocean, Air India is having its own share of troubles.

© livemint

The national flag-carrier hasn’t made money since 2007 and has accumulated about $11 billion of debt (report amounts vary) and was recently propped up by a $330 million bail-out by the Indian government. The airline is technically bankrupt and requires $1.3 billion to make repayments on the debt. There is also serious concern that should it default a consequence may be bankruptcy. Earlier this year, the carrier had 24 grounded aircraft, including several 777 and 787s and was unable to afford the scheduled maintenance to have them operational. Fuel suppliers were threatening to cut supplies. To raise funds, the organisation put up for auction dozens of its real-estate properties hoping to raise some $70 million but were unsuccessful. The Indian government previously said it would not extend any further loans.

In short, a disaster in the making.

© Reuters

You’d think the obvious answer is to privatise. Indeed, the Indian government is under pressure to economise on the national accounts would dearly love to make a quick sale. But…the airline is caught between a rock and a hard place; it attempted a sale of a 76% stake last year but failed due to a ‘lack of interest’ from bidders. With a Himalayan mountain of debt and with minimal prospects of a turn-around, added to a sour environment following the demise of Jet Airways in June this year, that shouldn’t be surprising.

So, question; how to make it more attractive? Answer; reduce the debt. The Indian government is now considering a plan to exclude $7 billion from the debt and try again, calling for ‘expressions of interest’ possibly as soon as December 15th. But it just never ends; as a result of a pilot’s demand for outstanding salaries, the Indian Company Law Tribunal issued a notice last Wednesday asking why bankruptcy proceedings shouldn’t be initiated.

The aviation minister, Hardeep Singh Puri told the Indian parliament on Wednesday that ‘The airline will have to close if it’s not privatised.’

We’ll continue to monitor this story as events unfold.

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