The Center for Asia Pacific Aviation (CAPA) has called upon the government to exit Air India completely as any level of equity retention will deter investors due to concerns over the possibility of continued government interference, post-privatisation.
CAPA has made this recommendation in its report titled ‘Air India’s Revival Package: CAPA’s Recommended Dos & Don’ts’ as the government gets ready to announce a second revival package for the state-owned carrier.
Jayant Sinha, Minister of State for Civil Aviation, recently told newspersons in Kolkata on the sidelines of the 187th Annual General Meeting of the Calcutta Chamber of Commerce, that the Centre is working on a revival package with four elements including financial assistance for Air India, which will be made ready for approval soon.
CAPA has argued that the Air India’s bailout needs to be accompanied by stringent conditions and oversights including cleaning up the airline’s balance sheet. “This is the most important first step. The airline can never be viable in its current avatar due to its massive debt and interest burden. The core divestment should consist of the airline operations only, namely Air India, Air India Express and optionally Air India Regional,” CAPA says adding that they should be sold along with aircraft-related debt and reasonable working capital loans.
“Special business units such as MRO (Air India Engineering), catering (Chefair), ground handling (both Air India Air Transport Services and AISATS) and Centaur Hotels should be sold off separately to raise capital that can be used to retire debt. Property and other non-core assets should be placed in a separate Special Purpose Vehicle,” CAPA said.
The aviation advisory has also called for allowing global carriers to pick up to 49 per cent as per the FDI norms for the sector. “No major Indian corporation from outside of aviation will invest in such a complex project without an experienced strategic partner. Allowing foreign airlines to participate will increase the number of interested bidders and the valuation,” the report said.
CAPA has also called for allowing the new investors to have reasonable flexibility to take commercial decisions on employee numbers and productivity over time, particularly for non-core roles, ideally by not replacing retirements. ``Similarly with retention of the Air India brand, the government should be open to discussions,” the report said.