The divestment of Air India is like a soap opera where the story takes new twists and turns without reaching anywhere.

The latest twist was provided by the Minister of State for Civil Aviation in the Rajya Sabha on Tuesday, when he told the Upper House that the Air India Specific Alternative Mechanism had approved the re-initiation of the process of the strategic divestment of Air India and its subsidiaries, with 100 per cent sale of the government stake’s in AI, along with Air India Express and AISATS. He further said preparations for a Preliminary Information Memorandum for inviting Expressions of Interest for the strategic divestment of Air India are in process.

Why divesting a stake in Air India is important

There has been little doubt for years now that the state-owned airline needs something dramatic for it to come out of the red. The government has been pumping in money in the airline for a long time now. In a written reply to a Lok Sabha question in June this year, Puri told the House just how much money had been infused into the Maharaja between 2014-15 and 2018-19. It was not a very rosy picture.

In 2014-15, the government infused ₹5,780 crore and the airline posted a loss of ₹5,859.91 crore. The following year the fund infusion was to the tune of ₹3,300 crore, with the airline reporting a loss of ₹3,836.78 crore. The following year the government infused ₹2,465.21 crore, but the losses climbed to ₹6,452.59 crore. In 2018-19, the government pumped in ₹3,975 crore and yet the airline reported a provisional loss of ₹7,635.46 crore.

In short, the government needs to get the Maharaja off its books, because it has become a bottomless pit where the money it invests vanishes without making any difference.

At the same time, the Maharaja needs to be a strong domestic airline, competing in both the domestic and international airspace if India wants to get back its position in the global aviation market.

Look at the manner in which Emirates has built the fortunes of Dubai. And who can forget that the airline was started with aircraft leased from Pakistan Airlines?

Why divesting AI is not easy

Even though the government sporadically expresses its intent and seriousness in divesting its stake in the airline, nothing seems to be getting of the ground.

Now, the government has admitted a slight slippage in the deadline for getting the process off the ground. In an interview to an international news agency, senior government officials said they may call for an expression of interest as early as December 15. Earlier, the cut-off date for getting the EOI out was at the end of November.

Even if that happens, the government has got the timing all wrong. It is common knowledge that the markets in Europe and the US go to sleep from mid-December till early or middle of January.

So, where are the bids going to come from and that too in time to meet the government’s deadlines? Indian players have already said a polite ‘no thank you’ or decided to not make a comment on the divestment of AI.

SpiceJet has indicated that it is too small a player to acquire Air India. Ronojoy Dutta, President and Chief Executive Officer, IndiGo preferred to keep silent rather than make an emphatic statement on picking a stake in AI.

What has further muddied the waters is the recent Supreme Court order, which said that Air India should be sent to the National Company Law Tribunal (NCLT). Sriranga Suppanna, Advocate, Supreme Court, who represented an Air India pilot for not getting his dues of over ₹63 lakh, told BusinessLine : “It will definitely clog the process. They will not be able to take a decision to divest when this process is on. They (divestment and NCLT) cannot go in parallel,” implying that the NCLT case will have to be decided first.

Worse, as time passes, what were seen as some of AI’s strengths, including a fleet of 125-plus aircraft, would become its weaknesses. With a legacy debt of ₹53,000 crore, its ageing fleet needs rapid replacement and it needs to change its work culture that is driven by low-performance, nepotism and political/bureaucratic interference.

Does this mean Air India will never be divested?

There will be a few who will wish for something like this. What the government needs is a clear roadmap on what it plans to do. While there might not be much interest in the mothership Air India, there is interest in for subsidiaries such as Air India Express and AISATS, which have shown profits and are standalone entities.

Sanjay Viswanathan, Chairman, AdiGroup, feels that Air India's best bet is for the Ministry of Civil Aviation to float the Maharaja on the bourse. “This will ensure that Air India gets time to execute a financial and operational turnaround. It will strengthen her balance sheet by attracting deep pools of long-term institutional as well as retail capital, and infuse world class corporate governance to fit public market standards and, hence, become attractive for best-in-class talent,” he says, adding that such a process would also ensure that AI “doesn't become the hegemony of an individual industrialist or business house, co-opts unions to become co-owners and, hence, joint stakeholders in the future of the airline, and it becomes an icon for Brand India and gives stiff competition to domestic and international carriers.”

However, the question remains: is anyone in the government listening?

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