Government of India has agreed to sell a 49% stake in the state-owned flag carrier, Air India to foreign investors, while retaining the controlling interest of the company. The politically challenged move is seen as a strategic divestment of Air India, which recorded annual losses for the past ten year straight with a current debt of 48,876 crore (US$7.35 billion).
The government appointed panel had recommended to postpone the privatisation until 2022, as the airline showed an operational profit this year in its ten-year turnaround plan that is currently in place. However, on Monday, Government was advised by a CAPA aviation think tank to fast-track privatisation process, warning a delay might further erode the value of Air India.
The privatisation of Air India is not welcomed by the opposition, and its senior Indian Congress leader, Anand Sharma, said “not caring” about Air India, “This is a departure from policy. Foreign carriers cannot be allowed to take over national carrier — you can allow equity participation. Clearly the government does not want to infuse funds.”
This reminds, how Alitalia was privatised after many turbulent years flying on Taxpayers’ benevolence, in 2008. The Italian government sold stakes to group of Italian businessmen, and later it changed hands to Abu Dhabi-based Etihad Airways owning a 49% stake in 2014. Finally, in May 2017, Alitalia filed for bankruptcy for the second time in less than a decade. The similar scenario can rewind with Air India privatisation.
No businessman will take out a penny if there is no return, so Alitalia events tells us that no matter who owns the business, as long as it is not fundamentally competitive it will go down the drain. If it goes down, it will affect more than 20,000 employees and their families.