New Delhi is hoping to privatise Air India to make the ailing national
carrier more competitive, but experts say debts of at least $8 billion could
deter buyers.
India's finance minister said on Wednesday the government had approved a plan
to sell a stake in Air India, which has long struggled to compete with
privately-owned rivals.
India has the world's fastest-growing passenger airline industry, expanding
at an annual rate of around 20 percent and the sector holds vast untapped
potential.
But its loss-making state airline is plagued by a reputation for delays,
cancellations and poor service.
Efforts to privatise the airline -- a huge drain on state coffers -- have
foundered in the past and experts said the government would have no choice but
to write off the debt if it was to attract a buyer.
"Who's going to take the risk of buying a loss-making airline and with a
mountain of debt?" said Dhiraj Mathur, a partner with the consultancy PwC
specialising in aviation.
Others said the current right-wing administration, India's first one-party
government in 30 years which touts itself as business-friendly, was well-placed
to achieve a sale.
"To write off $9 billion of taxpayers' money is not easy, but if anyone can
do it, it's this government," said Kapil Kaul, South Asia chief executive of the
Centre for Aviation, a consultancy.
"When Air India gets sold, it signals to the global investor that the new
India is real and possible."
Maharaja of the Skies
The other major obstacle is the unions representing Air India's staff, which
have fiercely opposed a sale.
Nonetheless the country's largest airline IndiGo has already expressed an
interest in Air India, a government official told reporters Thursday.
The Tata Group, an Indian conglomerate that owned Air India before the
carrier was nationalised nearly 70 years ago, has also been touted as a possible
purchaser.
But a tweet from Anand Mahindra, the Indian billionaire who heads the
Mahindra Group conglomerate, underscored the challenges facing the government in
finding a buyer.
"I see myself as a generally courageous person. But I confess .. I don't
possess THAT much courage," he tweeted.
The airline -- known as the "Maharaja of the Skies" for its turbaned mascot
-- may not be winning in the reputation stakes.
But Amber Dubey, partner and India head of aerospace and defence at global
consultancy KPMG, said its large fleet and significant market share could make
it an attractive proposition -- if the debt was written off.
"It's a one-time deal wherein the winner takes all and others may take years
to catch up," he said.
Air India has its roots in the private sector. It was set up by Tata Sons in
1932 and acquired by the Indian government in 1953.
Its problems can be blamed on a combination of poor decisions, a lack of a
consistent leadership and political interference -- including frequent demands
from politicians for new routes to their constituencies.
"This is a tough call for the government, but if it can do a once-for-all
clean-up and not look back, it can expect significant interest in the airline,"
Kaul said.
(AFP)