Debt may put off Air India bidders
• Analysts say government has no choice but to write off the struggling national carrier’s losses if it is to attract private purchasers
New Delhi is hoping to privatise Air India to make the ailing national carrier more competitive, but experts say debt of at least $8bn could deter buyers.
New Delhi is hoping to privatise Air India to make the ailing national carrier more competitive, but experts say debts of at least $8bn could deter buyers.
India’s finance minister Arun Jaitley said the government had approved a plan to sell a stake in Air India, which has long struggled to compete with privately owned rivals.
India has the world’s fastestgrowing passenger airline industry, expanding at an annual rate of 20%. But its loss-making state airline is plagued by a reputation for delays, cancellations and poor service.
Efforts to privatise the airline — a huge drain on state coffers — have foundered in the past and experts said the government would have no choice but to write off the debt if it was to attract a buyer.
“Who’s going to take the risk of buying a loss-making airline and with a mountain of debt?” said Dhiraj Mathur, a partner with the consultancy PwC specialising in aviation.
Others said the administration, India’s first one-party government in 30 years that touts itself as business-friendly, was well placed to achieve a sale.
“To write off $9bn of taxpayers money is not easy, but if anyone can do it, it’s this government,” said Kapil Kaul, South Asia CE of the Centre for Aviation, a consultancy.
“When Air India gets sold, it signals to the global investor that the new India is real and possible,” Kaul said.
The other major obstacle are the unions representing Air India’s staff, which have fiercely opposed a sale. Nonetheless, the country’s largest airline IndiGo had already expressed an interest in Air India, a government official said on Thursday.
The Tata Group, an Indian conglomerate that owned Air India before the carrier was nationalised nearly 70 years ago, has also been touted as a possible purchaser.
But a tweet from Anand Mahindra, the Indian billionaire who heads the Mahindra Group conglomerate, underscored the challenges facing the government in finding a buyer.
“I see myself as a generally courageous person. But I confess I don’t possess THAT much courage,” he tweeted.
The airline — known as the “Maharaja of the Skies” for its turbaned mascot — may not be winning in the reputation stakes. But Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, said its large fleet and market share could make it an attractive proposition if the debt was written off.
“It’s a one-time deal wherein the winner takes all and others may take years to catch up,” Dubey said.
Air India has its roots in the private sector. It was set up by Tata Sons in 1932 and acquired by the Indian government in 1953. Its problems can be blamed on a combination of poor decisions, a lack of a consistent leadership and political interference including demands from politicians for new routes to their constituencies.