Air India Divestment Gets ‘In-Principle’ Cabinet Approval

India’s national carrier is saddled with more than Rs 50,000 crore debt. (Photo: The Quint)

The government on Wednesday set in motion plans to divest stake in debt-laden national carrier Air India.

The Union Cabinet approved government thinktank NITI Aayog’s proposal of Air India divestment, Finance Minister Arun Jaitley told reporters at a media briefing. A panel will be set up to finalise the modalities and the details of the stake sale, he added.

India's national carrier is saddled with more than Rs 50,000 crore debt.

Air India has been unprofitable since it was merged with Indian Airlines in 2007. It saw its losses widen to more than Rs 7,500 crore in the financial year 2011-12 and stood at Rs 3,836.7 crore at the end of FY16, according to the civil aviation ministry’s response to a question in the Lok Sabha in March.

This had prompted the NITI Aayog to recommend the privatisation of Air India to the Civil Aviation Ministry.

With the airline's losses mounting, the government had in 2012 approved a turnaround plan for the carrier. Under the plan, the government was to infuse over Rs 30,000 crore by 2021 in Air India, which was subject to achieving certain milestones.

Air India had sought Rs 3,901 crore as equity infusion from the government during financial year 2016-17 as part of the turnaround plan, of which Rs 2,465 crore was released by the government as part of Budget 2016-17.

Till date, the government has pumped in Rs 24,745 crore under the turnaround plan, according to a written reply in the Lok Sabha.

The national carrier still has the second largest fleet of aircraft among all domestic airlines. Air India's own fleet stood at 118, according to its website, second only to IndiGo's 135 aircraft. It also flies the most number of passengers overseas among all other domestic airlines.

Air India has seen its local market share decline as low-cost rivals SpiceJet Ltd. and Interglobe Aviation ltd.'s IndiGo added capacity aggressively.

Its market share has shrunk to under 13 percent in May from over 35 percent in 2006.

(This article was first published in BloombergQuint and has been republished with permission.)

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