With the plans to privatise Air India having failed, the government has put up a proposal for approval of an equity investment of Rs 2,300 crore (US$ 330 million) in the struggling airline.
The government had offered Air India for privatisation earlier this year, but the exercise was a grand debacle as not even a single bidder came to the fore. It is possible that the offer itself scared investors away.
The government’s offer was for 76% stake in Air India, 100% in its subsidiary Air India Express and 50% in its ground handling staff. The prospective bidder would also have to take up Rs 33,392 crore of debt and keep the airline staff for a year. Anand Mahindra, Vice Chairman & MD, Mahindra Group, put it quite aptly in 2017 when he was asked if he would invest in Air India, “I see myself as a generally courageous person…But I confess… I don’t possess THAT much courage…”
The airline hasn’t been profitable since the last ten years and has a total of US$ 8 billion of debt on its books. It is surviving on an annual bailout package of Rs 4,600 crore. Around Rs 28,000 crore have been wasted on turning it around, and Air India had reportedly asked the finance ministry for a bailout of another Rs 30,000 crore that was fortunately refused.
The failed stake sale was a setback for the government exchequer as well as a loss of face for Modi himself. Minister of State for Civil Aviation Jayant Sinha had said last week that the government had devised a four-stage process for the airline – a financial package, a branding refresh, organizational and governance reforms and a plan to motivate staff.
Air India has seen far better days in the past, but has gone downhill largely due to poor management and political interference. It leads its competitors on parameters like on-time performance, flight cancellations, passenger complaints and grievance redressal. With even the likes of Anand Mahindra refusing to touch it with a barge pole, common sense would say that shutting it down is the best option. But successive governments have failed to address the issue in this objective sense, and the current one is no better.