Air India's road to disinvestment: Good news for employees, uncertain future for airline

The drama involving Air India, which kicked-off last week with news about the government deciding to allow 49 per cent foreign investment in the ailing national carrier, saw its second and third acts playing out yesterday. To begin with, Junior Aviation Minister Jayant Sinha declared that the airline will be split into four different verticals to facilitate its sale by December this year. Then, the Parliamentary Standing Committee on Transport, Tourism and Culture, in the absence of panel's chairman and Trinamool Congress leader Derek O Brien, decided to withdraw its contentious draft report.

On January 7, the parliamentary panel had said that this was not an appropriate time to divest government stake in Air India and that the carrier should be given at least five years to revive. It reportedly gave 11 reasons on why the government should not sell stake in AI to other airlines. The panel is also understood to have concluded that the equity infusion in the national carrier, as part of the turnaround plan (TAP), was made on a "piecemeal basis", adversely affecting its financial and operational performance and "forcing" the airline to take loans "at a higher interest rate to meet the shortfall".

At the meeting yesterday, after a majority of the 31-member panel opposed adoption of the draft report, the officiating chairman, BJP member Rakesh Singh, adopted a proposal to withdraw it. Interestingly, a majority of the members in favour of divestment are from the ruling BJP. Strongly objecting to withdrawal of the report, three opposition members, including Kumari Shelja from the Congress party and TMC's Arpita Ghosh reportedly walked out of the meeting. It could not be independently confirmed whether the panel, in the absence of its chairman, could decide to withdraw a report. However, according to media reports, the BJP has claimed that no parliamentary rules were flouted by the panel. In any case, unless challenged, the government now has one less potential speed-breaker to deal with on its Air India plans. At least the carrier's 29,000 employees (including those working for subsidiaries and on contract basis) may not have to worry about pink slips in their future-reports suggest that the government may consider absorbing them in various public sector undertakings (PSUs).

Though no specifics have been shared yet, the government is reportedly planning to sell the core airline business comprising Air India and Air India Express as one company and separately sell its regional arm, ground handling, and engineering operations. This is a complete U-turn from the government's previous stand, where it had said that splitting Air India into parts could decrease its total valuation. Air India had a total debt of about Rs 48,877 crore at the end of March 2017, of which about Rs 17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans.

In a recent note, consulting firm CAPA Centre for Aviation said that it expects "significant interest from foreign airlines" and "4-6 serious bids for AI subject to bid conditions". While IndiGo and the Tata group have shown interest in Air India's operations, Turkey's Celebi Aviation Holding, Bird Group, Menzies Aviation Plc and Livewel Aviation Services Pvt. Ltd have shown interest in the national carrier's subsidiaries. According to Mint, the government hopes to invite expression of interest from companies after Union Budget 2018.

With PTI inputs