Tough choice for Air India, disinvestment or shutdown for good

The national airline’s fate is on the rocks with the Civil Aviation Minister Hardeep Singh Puri saying that Air India will be 100% disinvested, as the choice is between disinvestment or closing down.

“We have decided that Air India will be 100 per cent disinvested. The choice isn’t between disinvestment and non-disinvestment. It’s between disinvestment and closing down.  Air India is a first rate asset, but has accumulated debt of Rs 60,000 crore,” Puri told ANI. “We need to draw the slate clean. It must find a new home.”

The minister highlighted that in the last meeting, it was decided that the shortlisted bidders for Air India disinvestment be informed that the bids have to come in within 64 days. He said the government is determined and there is no hesitation.

Puri had earlier said that the airline is likely to incur a loss of Rs 9,779 cr for the financial year 2020-21. “The COVID-19 pandemic, along with its related impact on the aviation industry has worsened the financial position of airlines in the country, including Air India,” he told the Parliament.

In the budget last month, the government allocated Rs 2,268 crore for a special purpose vehicle set up as part of the financial restructuring of the national airline. Finance Minister Nirmala Sitharaman had said the disinvestment of Air India and Pawan Hans would be completed in the next financial year.

The government has so far received multiple expressions of interest after it put the airline under sale on January 2020, and those have been evaluated by transaction adviser Ernst & Young LLP India. The adviser will intimate the qualified interested bidders about the next steps for the proposed disinvestment.

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According to preliminary terms, the entire company will be sold but effective control needs to stay with Indian nationals. Air India, which started in 1932 as a mail carrier before winning commercial popularity, saw its fortunes fade with the emergence of cutthroat low-cost competition. The state-run airline has been unprofitable for over a decade, and is saddled with more than $8 billion in debt.