Air India Privatization Back on Government’s Agenda

Neelam Mathews

June 8 2017

AIN

Having gained a majority in parliament, the government of Indian Prime Minister Narendra Modi has begun seriously considering the restructuring and/or privatization of national carrier Air India. A high GDP growth rate and a domestic aviation market set to overtake Japan this year as the world’s third largest has led to calls for a more effectual national carrier. Air India’s debts now amount to $7.5 billion, about half of which stems from aircraft loans.

The Ministry of Civil Aviation, prodded by a proposal made by the government’s newly formed innovation think tank Niti Aayog, has started the process of preparing a note for the cabinet that will decide on the future course of action, confirmed junior minister of civil aviation Jayant Sinha at a press briefing on June 5. He and an Air India official both refused to comment on the details or reports that the new entity could launch in 18 months.

Asked whether the move could presage the purchase of Air India by a foreign carrier, minister of civil aviation Ashok Ganapathy Raju said he did “not want to give in to speculation.”

Discussions on privatizing the carrier have occurred many times in the past. However, this marks the first time senior decision-making government officials have openly aired their comments.

“In the domestic sector, already 86 percent of passengers are flying with private airlines,” finance minister Arun Jaitley told the Times Now television channel. He added that he would not oppose selling the airline completely. “I do not think in the government there are two views on this,” he said.

“It is not the government’s business to be in the business of the service industry,” said Vishok Mansingh, CEO of Mumbai-based consultancy CAV Aero Services. He added Air India branding needs an overhaul similar to what the now privatized Malaysia Airlines undertook three years ago. “Who would not want to be part of [India’s 20 percent annual traffic] growth?” he asked rhetorically. Mansingh expressed hope that an airline, foreign or Indian, would buy a stake in Air India rather than a corporate entity “to ensure there would be no manipulation of staff, including pilots and crew, which could be replaced from the inventory of the investing airline.”

Jitender Bhargava, former executive director of Air India and author of Descent of Air India, insisted that Air India in its current form could not survive. “It has moved from meaningful existence to meaningless survival,” he quipped, adding that, although the airline lacks strong leadership, he opposes the prospect of a foreign carrier taking control. “Air India has been an institution with enormous emotional quotient…It has assets that include real estate, an engineering company, catering, airport slots, pilots, bilaterals, subsidiary airlines…We need to look at it in totality so it does not get undervalued,” he warned. “Why should a foreign carrier benefit from the Indian economy?”

“Times have changed,” argued Mansingh. “If Tata can buy Jaguar and Range Rover in the UK, why can’t a foreign airline buy Air India?”