Livemint: May 29, 2017
New Delhi: India has a historic second chance, after nearly one-and-a-half decades, to disinvest in state-owned Air India Ltd and help propel the growth of aviation sector, finance and defence minister Arun Jaitley said.
In a conversation with state-run broadcaster Doordarshan aired on Saturday, Jaitley said he had first proposed disinvestment in Air India when he was disinvestment minister in 1999 in the government of Prime Minister Atal Bihari Vajpayee.
“Disinvestment is always the art of the possible,” Jaitley said. "We will do so now also. Individual units can go in the direction of privatisation. There is a possibility. Some have been identified."
Air India, which has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations, could be the next.
The airline is the single biggest international carrier from India with a 17% market share. It also controls 14.6% of the domestic passenger market which has eroded over time as private airlines expanded capacity.
“As far as Air India is concerned, it’s a very difficult question. When I was the disinvestment minister in 1999-2000, I had said please disinvest Air India, otherwise there will be nothing left to disinvest. This was some 18 years back," Jaitley recalled in response to a specific question on the whether the government plans to disinvest in the airline.
Since then the market dynamics have changed even more. InterGlobe Aviation Ltd-run IndiGo controls 40% of the market, followed by Jet Airways, SpiceJet and GoAir. Tata Sons Ltd has launched Vistara in collaboration with Singapore Airlines; Vistara is also gearing up to start international flights from next year.
"Today, what has happened is (Air India's) market share is 14%. And the debt is Rs50,000 crore. Now, there are private airlines that are flying—Indigo, GoAir, Spicejet, Jet Airways— there you don’t invest money. But to run Air India, you have invested Rs50,000 crore. That money is government’s money, that’s your money. It could have been used for school education. And if 86% of flying can be handled by private sector, so it can also handle 100%.”
The airline has so far received Rs23,993 crore of the Rs30,231 crore equity infusion promised by the government under a financial restructuring plan introduced in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore in the previous year.
The Economic Survey 2017 had also recommended this year that government should privatise Air India.
Jaitley said civil aviation was poised for rapid growth in the next 10-15 years. He indicated that the anticipated growth makes it even more important that Air India makes a turn-around.
“So history has given us a second chance that a good investor should come, which has credibility so civil aviation ministry will consider it (disinvestment),” he said.
The International Air Transport Association (IATA) expects India to displace the UK as the third-largest aviation market by 2026. India’s air passenger traffic will grow to 442 million by 2035—a rise of 322 million passengers from the current number, it estimates.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.