Air India Faces Privatization Or Shutdown Utlimatum

As the Air India sale process continues, Civil Aviation Minister Hardeep Singh Puri has made the options clear: privatize or shutdown. Speaking to Parliament, he made it clear that Air India’s high debt makes the airline unsustainable to run by the government. Let’s find out more about the sale process and when Air India will be in private hands.

Air India 777-300ER
Air India is currently losing $2.7 million every day despite key changes at the carrier. Photo: Vincenzo Pace | Simple Flying

Ultimatum

In remarks before the Parliament, seen in News18, Civil Aviation Minister Hardeep Singh Puri updated MPs about the status of the Air India sale. He made it clear that privatization is the only option for the airline and failure to do so would see Air India shut down completely.

This is because of the flag carrier’s massive debt, which currently sits at ₹60,000 crores ($8.28 billion).

He added that while Air India is a “first-rate asset,” the debt simply makes the carrier unsustainable to run. Explaining the airline’s current financial state as well, Mr. Puri made it clear that “we need to draw the slate clean”.

Air India delhi airport
While it might be a strong asset, the historical debt means the government must sell the airline soon. Photo: Getty Images

Currently, Air India’s daily cash burn stands at ₹20 crores ($2.76 million). While this is lower than many other major carriers, it comes even as Air India is now making money, according to Mr. Puri. This means the debt has made the airline unsustainable to fly even while it is making money. So when will we see the carrier to go private hands?

Timeline

Last week, the government finalized the shortlist of bidders for Air India, with the race down to the Tata Group and SpiceJet MD Ajay Singh. The two bidders will now have roughly two months (64 days) to analyze internal data and place their financial offers for Air India.

The government hopes to complete the entire divestment process by May or June of this year. This is certainly an optimistic timeline considering the delays seen in the past, but Mr. Puri has made it clear that the government does not want to hold on to Air India for much longer.

Vistara Air India
The new owners could take over Air India during the lucrative summer season, although there will be much work to do at the airline first. Photo: Pranjal Pande | Simple Flying

The coming month will tell us more about if the government can stick to this timeline. For now, both Tata and Ajay Singh are likely poring over Air India’s internal data to plan their final bids.

Out the door

Explaining why this privatization would be different from previous ones, Mr. Puri said that the government is determined to sell the airline and other attempts had been half-hearted. Indeed, the sale will also see the government receive a cash surplus, with at least 15% of the debt being paid upfront by the new owner. Moreover, the sale will mean one less loss-making enterprise for the government to manage during this crisis.

Air India 777-300ER
After a decade of headaches and losses, leaders are finally ready to let go of the airline. Photo: Vincenzo Pace | Simple Flying

What do you think about the future of Air India? Let us know in the comments!


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