The new thinking on strategic disinvestment of loss-making Air India, spurred by a report prepared by Niti Aayog, makes sound sense in the light of the huge losses that the national carrier has been accumulating without any light being visible at the end of the tunnel. The ball is in the court of the Union Cabinet but the fact that Finance Minister Arun Jaitley has favoured a stake sale in the bleeding national carrier is a fair indication that the Modi government may not deem it worthwhile to sink in more money into the airline whose accumulated debt is estimated to be about Rs 60,000 crore. Internationally, many flag carriers have been in dire straits but Air India’s woes have been compounded by shockingly bad decisions in yesteryears, some of them ostensibly driven by vested interests in the erstwhile UPA regime, and tortuously slow reaction time in attending to problems in their incipient stage as well as now.
Instructively, at the global level, Austrian Airlines has been sold to Germany’s Lufthansa, Qantas to British Airways and partly divested to the public, Air France – KLM has opted for majority public ownership while British Airways, Japan Airlines and Lufthansa have gone for public listing.
The Niti Aayog recommendation is to transfer the aircraft-related loans amounting to Rs 21,000 crore and Rs 8,000 crore working capital to the new owner while taking care of half the liability. Loans worth Rs 30,000 crore are proposed to be written off which the Union government would have to be approached for. The plan is to hive off the real estate assets of the airline to a separate company and to offer the new buyer 100 per cent equity. The real estate includes the high-cost Nariman Point office in Mumbai and some property in the prime Vasant Vihar colony in New Delhi. Since the merger of Indian Airlines with itself, Air India has been in the red. However, it posted an operational profit of Rs 105 crore on account of low fuel prices and increased passenger numbers in 2015-16. On Tuesday, the Civil Aviation Ministry said all possible alternatives are being considered to make Air India viable, even as it asserted that the clock cannot be put back on the Indian Airlines merger.
The issue of privatisation of Air India must be decided once for all. Niti Aayog has suggested that the public money that its annual losses take up could be diverted instead to health and education. That would indeed be a worthy use of scarce resources.