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Is Disinvestment of Air India Appropriate?
An analysis of Air India’s financials reveals that the national carrier is on the path to profitability. Strategic disinvestment at this time will prove to be suboptimal. It is shown that debt obligations of the carrier can be serviced, given its improving performance. The airline’s revenues also entail large amounts of foreign exchange inflows. With global crude oil prices expected to remain subdued, strategic disinvestment of Air India at this juncture is not desirable.
Views expressed are personal and cannot be attributed to the organisation the authors work for.
It was reported that NITI Aayog, the government’s think tank, has recommended the strategic disinvestment of the loss-making airline, Air India (AI), to allocate more funds for education and health. The cabinet has since given an in-principle approval to begin the disinvestment of AI, and a ministerial panel has been set up to oversee the process. News reports mention that given the current financial performance and the existing 14% market share, the government think tank opined that AI would do far better if the government restructures with a private partner. Given its massive debt of ₹52,000 crore, the think tank felt that such a step would facilitate AI, with an operational fleet size of 118 aircrafts,1 to evolve into a global airline as early as possible. These reports also mention that the think tank has cited international examples of governments divesting their entire stakes in airlines such as British Airways, Japan Airlines, and Austrian Air to support its argument that an evolution of a strong and viable airline would require bringing a strategic investor (Mishra and Sharma 2017; Rajya Sabha TV 2017).
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