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Friday, 29 June, 2018, 17 : 46 PM [IST]

Decision to scrap Air India divestment plan disappointing: Experts

Experts in the aviation business believe that the Union government’s decision to put on the back burner the plan to divest 76% in Air India will only increase the burden on taxpayers and will be detrimental to its future. The baggage of the failed bid will further deal a body blow to the national carrier in the current aviation atmosphere where all the players are already reeling under pressures of yields, higher taxes and rising fuel prices. Instead of putting the divestment plan, considered a bold move, on hold, experts argue that the government should restart the process by ensuring better terms for potential buyers and work on restructuring the airline by reducing its liabilities on the financial and human resource fronts. Disha Shah Ghosh ascertains views of the experts.

Jitender Bhargava, former Executive Director, Air India & Author of The Descent of Air India

The decision to put Air India disinvestment on hold is unfortunate because time is fast running out for Air India. The only course available to stem further marginalisation of its current domestic and international market shares is to renew effort for disinvestment by ensuring better terms of acquisition for airlines desirous of bidding. While Air India undoubtedly has huge strengths, the liabilities also cannot be lost sight of.  It will be desirable for the government to minimise both financial and human resource liabilities in the interim so that the acquisition exercise not only becomes lucrative, but also acceptable to potential buyers. Any desire to delay disinvestment or call it off indefinitely due political expediencies is fraught with danger as it can threaten its very existence in the not-so-distant future. 

Kapil Kaul, CEO, India & Middle East, CAPA

We are disappointed with the government’s decision. Continuing government ownership and the lack of a clear roadmap will lead Air India to extreme insignificance and possibly closure. There will never be a perfect timing for divestment as conditions for divestment have to be structured by some bold decisions. The government will have to focus on the comprehensive restructuring of the airline under a special administration to scale down losses significantly.

Ajay Prakash, Aviation Expert & Chief Executive, Nomad Travels

The proposal was a non-starter from day 1. The monumental debt combined with a 24% government stake was a fatal combination, guaranteed to drive away even the most optimistic bidder. If and when the government decides to put Air India on the block again, the baggage of this failed bid to disinvest will haunt the new endeavour.

Kinjal Kirit Shah, VP, Corporate Sector Ratings, ICRA Ltd.

Most of the domestic airlines are ailing under high-cost pressures and high-debt burden. For the divestment to be successful, the government will have to make the terms of sale more attractive. For continued uninterrupted operations of the airline, it would require significant funds infusion, and Air India will also need to rationalise its operating costs.

Biji Eapen, National President, IAAI

Having deferred the divestment of Air India, the latest decision is to infuse fresh capital from the taxpayers’ money. We want such public money to be spent to re-incarnate the ‘Maharaja’ as our own national carrier and not on another listing.
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