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Air India privatisation move draws union opposition

30 June 2017, 01:02 | Lucy Hill

Image credit Adrian Pingston Wikimedia Commons

Union Cabinet approves privatisation of debt-ridden national carrier Air India

Air India-one of the most famous air carriers in India was struggling with a debt of more than Rs 52,000 crores for many years.

The committee set for this objective will "guide the process on strategic disinvestment from time to time and decide the following: Treatment of unsustainable debt of Air India; Hiving off of certain assets to a shell company; Demerger and strategic disinvestment of three profit-making subsidiaries; The quantum of disinvestment; and The universe of bidders".

IndiGo, operated by InterGlobe Aviation Ltd, sent in its interest late Wednesday night, minister of state for civil aviation Jayant Sinha said.

Jaitley has in the recent past expressed strong views on the need to divest Air India considering that it had acquired heavy losses over a long period. The National Carrier survived for the bailout package of 30,000 Crores that has pumped in by the Government during UPA-II to save the Airlines.

The decision was given by the Union Cabinet at its meeting chaired by Prime Minister Narendra Modi.

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Leading domestic carrier IndiGo has expressed its interest to buy out Air Indias flight operations, particularly worldwide services, as the airline looks to spread its wings overseas. It has a domestic market share of 14% and a share of 17% on global routes out of India. A panel headed by the Finance Minister would decide the course of action.

Given that the domestic air passenger traffic in India is forecast to grow at a 13 percent CAGR from FY16 to FY26, according to Morgan Stanley Investment Management, Agrawal said, "I would expect that there would be interest from somebody willing to buy a company which is already up and running, instead of starting something from scratch". Air India traces its roots to Tata Airlines, which was formed way back in 1932.

Together with the letter, IndiGo included a small presentation showcasing its market, network and fleet expansion plans, said a government official, who has seen the letter and declined to be named.

He also cited IndiGo's track record of consistently being profitable airline with a strong balance sheet.

The ministerial group will consider among other things, the treatment of unsustainable debt of Air India; hiving off of certain assets to a shell company; demerger and strategic disinvestment of three profit-making subsidiaries; the quantum of disinvestment; and the universe of bidders. Air India Privatization has been under consideration for the 30000 Crores Working Capital Loan and 22000 Crores Aircraft Purchase Loan. "The civil aviation ministry is exploring all possibilities", Jaitley had said. With an equal stake in low-priced carrier AirAsia India in partnership with Malaysia's Air Asia and a controlling stake in a premium airline Vistara in a joint venture with Singapore Airlines, Ratan Tata has established himself as an airline aficionado not only in Indian media but also in the likes of Bloomberg. Familiar lovable figure first made his appearance in Air India way back in 1946, when Bobby Kooka as Air India's Commercial Director and Umesh Rao, an artist with J.Walter Thompson Ltd., Mumbai, together created the Maharajah.

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