The Indian aviation sector has been one of the greatest untapped potential parts of global aviation, yet also one of the counties that faces the greatest challenges.
Major airlines such as Kingfisher and Jet Airways have come and gone. Racking up huge piles of debt and struggling to get around red-tape in the aviation sector.
An Air India plane prepares to take off at airport in Mumbai, India, on 28 January 2020. (Photo by … [+]
Air India is not different, however, it has for many decades had the support of the Indian government. Time after time the government has prevented other private carriers from succeeding to support consistently unprofitable and inefficient Air India.
Competition has been almost impossible since the government imposed certain rules for new carriers such as ticket price limits for domestic flights, and the necessity to operate largely unprofitable domestic routes for five years before being allowed to compete on profitable International routes.
Air India airplanes at Chhatrapati Shivaji Maharaj International Airport (formerly known as Sahar … [+]
These rules have all but supported a perpetually loss-making Air India—until now.
The Indian government is finally cutting the airline loose, after many years of losses and failed competitive carriers left behind.
Air India has amassed a debt of more than $8 billion and the details of divesting the company are still being worked on by the government who is looking for bidders to take the carrier private.
Air India planes and engines are kept in the tarmac at the Indira Gandhi International Airport in … [+]
Since the financial year of 2011-12, the government has now injected more than 30,500 crore ($4.25 billion USD) into the carrier, despite approving only 30,000 crore over a 10-year period for a turnaround plan from 2022.
With 12 narrow-body A320 aircraft currently grounded awaiting engine replacement, the situation seems like Deja Vu from the fate of Jet Airways recently.
The government is now looking for a buyer for 100% of Air India but it will come with a debt pile of more than $3.2 billion, along with other liabilities.
LONDON, UNITED KINGDOM – 2020/01/19: An Air India Boeing 777-300ER lands at London Heathrow airport. … [+]
More than 12 months ago the government attempted to sell a controlling interest in Air India, but this did not attract a buyer. It is now hoped that by offering 100% of the struggling carrier, bids may materialize. However, with domestic passenger traffic growth increased by just 3.5% last year, as opposed to an 18% increase in 2018, demand in the Indian market could be cooling as well.
The airline would require a restructuring of its 14,000 employees, which could serve as another potential hurdle to foreign buyers, along with other obstacles that the government has blamed on high airport fees, low-cost competition, and a weakening rupee.
Air India planes are kept in the tarmac at the Indira Gandhi International Airport in New Delhi on … [+]
Despite this, with valuable international landing slots, and even some old grandfather slots (allowing Air India to take off and land, as well as sell tickets from third party destinations such as Delhi-London Heathrow-JFK), and over 100 aircraft of which the airline owns over 50% of their fleet assets, there could still be bids that come in for the struggling carrier.
Any interested parties have until 17 March 2020, to submit a bid for Air India and any bidders will be notified by 31 March.
With the government previously wanting to retain a 24% stake in Air India that it would have sold after a successful turnaround plan is completed, this time they are looking for a clean slate.
