NEW DELHI: All stakes of Air India should be sold and only that would ensure successful privatisation of the national carrier, an aviation think tank said on Wednesday, implying that half measures for privatisation of the airline would prove to be counter-productive. “The government should exit Air India completely,” aviation consulting firm CAPA said this while releasing a brief report on Air India’s impending disinvestment. It added that any level of equity retention would raise concerns about the prospect of government interference after privatisation.
The report further said that privatisation of Air India would make sense only after all its debts are cleaned up. Calling the “clean-up of its balance sheet” the first and most import step for the airline’s disinvestment, CAPA said, “The airline can never be viable in its current avatar due to its massive debt and interest burden.” Earlier this year, the government decided to go for Air India’s strategic disinvestment and presently, the modalities for the same are being worked out by a group of ministers. The national carrier has a debt burden of more than Rs 50,000 crore. The report said that the core divestment should consist of the airline operations only -- Air India, Air India Express and optionally Air India regional. These operations should be sold along with aircraft- related debt and reasonable working capital loans, it added. According to the report, Air India Express is the low cost international arm of the flagship airline.
According to CAPA, the divestment would fetch most fruitful results if special business units such as MRO (Air India Engineering), catering (TajSATS), ground handling (both Air India Air Transport Services and AISATS) and Centaur Hotels are sold off separately because that would raise capital which in turn can be used to retire debt. “Property and other non-core assets should be placed in a separate special purpose vehicle,” it added.
The think tank also advocated for foreign airlines being allowed to bid for stakes in the loss-making national carrier. “Global carriers should be permitted to invest up to 49% 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,” it said. Another key suggestion made by CAPA for disinvestment is of the airline offering a single integrated network, adding that separation of domestic and international operations will result in reduced interest. “The domestic and international operations should be offered in one line, as there is significant value in the feed which they provide to each other,” it said.