Privatize or Perish: The Apprehension for Air India

By Ankur Deo | January 3, 2020

Privatize or Perish: The Apprehension for Air India, by Travel Radar Correspondent Ankur Deo

On January 2, 2020, Indian Civil Aviation Minister, Mr. Hardeep Singh Puri reassured Air India’s employees that the airline shall remain afloat till its privatization process is complete. This statement comes just days after the airline officials expressed concern that the carrier might be heading for destitution even before the process of privatization begins. The Indian Commercial Pilots’ Association (ICPA) has opposed privatization of the carrier, however, Mr. Puri stated that the government does not have sufficient funds to infuse into Air India (AI), given the fact that the airline is losing about Rs.20 crores (approximately, $3m) daily.

Just last month, Mr.Puri told the Parliament that the airline will have to be shut down if it fails to find a buyer. The bidding process to buy AI is expected to begin on January 10, 2020. To encourage buyers, the government has laid off a debt of $7b (still leaving the airline in a mammoth debt of $11b).

However, despite its gloomy financial situation, Air India does have some unique elements to offer to any potential acquirer, namely,

  1. Highly valued international slots,
  2. A strong foothold in the Indian market.

Image Credits: Airbus

Roadshows were held in Singapore and London to gauge investor interest for the debt-laden national carrier. Recently, India’s leading Low Cost Carrier, IndiGo Airlines and Abu Dhabi’s prime-ship, Etihad Airlines showed their interest in buying stake in AI. If any of these deals take shape, acquiring the prime slots and new routes that AI has to offer could hugely benefit the buyer.

And now, the elephant in the room: What happens if the airline does not find any acquirer? Sounding alarm bells, a senior AI official stated that if the government is unable to find a buyer by June 2020, the airline might be shut down. With the government leaving Air India to fend for itself by infusing limited funds amid its privatization plans, the airline is barely keeping afloat, which is unlikely to sustain for long, the official said. Currently, 12 of AI’s Airbus A320 aircraft are grounded, needing engine replacement. To make the most out of their fleet, AI needs these aircraft in the sky, however, it needs Rs.1000 crores (approximately, $150m) to get new engines. With a crippled fleet and marred finances, the future looks ever so drab for AI.

Will AI be the first victim of 2020? Or will a successful sale of the airline lead to its revival later in the year? With the bidding process to begin soon, we are closely following this saga unfold; stay tuned for more updates!

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