Privatise Air India to help it take off
assets i.e. no real estate, hotels etc. The joint venture with SATs should be offered to SATs at reasonable premium for control - or put to bid if SATs declines. Simultaneously, based on identified “disposable pool”, Air India’s real estate assets need to be put on the block starting with excess land and hotels, and gradually covering prime office buildings that can be released over time. Air India metro head offices are a gold mine. The disposal process should be run independently by the department of disinvestment, albeit in cooperation with the ministry of civil aviation. Potential proceeds from non-core sales may run into thousands of crores.
This sets the base for stage 3 or airline sale. The three “revival” requirements were capital, restructured debt and professional management. Given poor financials especially the nearly Rs 50,000 crore debt, our expectations from the sale should be stopping further outflows.
To attract buyers, 75% of the estimated proceeds of sale of non-core assets may be offered as restructuring pool to potential bidders. Bidders should then be asked to tender for 100% of Air India’s flight operations on the basis of minimum additional support (MAS).
The MAS will be paid out to the investor after the bank restructuring has been agreed. Similarly, the bid conditions should also define both the compensation structure for use of Air India on national duty like evacuations. The lowest MAS wins. The winning investor would then negotiate with the banks on a restructuring package using the MAS and the restructuring pool of funds.
This will still leave the question of serving remote areas – but that is a relatively easy problem to solve, and for much less than Rs 30,000 crores.
While difficult, the certain alternative is never-ending government bail-outs in a hyper-competitive industry. Or in other words, death by a thousand cuts. Privatisation will potentially create a new Air India under the control of new management and will cap government support.
Air India must remain our national airline, just not as a nationalised burden on taxpayers.