In one of the much delayed reforms, the Government on Wednesday approved the privatization of debt ridden airlines and its five subsidiaries.
After a Cabinet meeting, Air India’s divestment plan has been secured and Finance Minister Arun Jaitley will head the panel, who would decide the modalities of the sale.
The Cabinets approval for disinvestment was finalized on the basis of a proposal presented by the Civil Aviation Ministry.
The government came to the view that takeover of Air India by a private entity would be feasible, as to unburden itself from the bleeding airlines.
The airline has a debt of more than 52,000 crores and is surviving on a 30,000 crores bailout package provided by the UPA Government in 2012.
Three options of 51%, 74%, and 100% stake sale has been given by the Department of Investment and Public Asset Management.
The panel will study all possibilities for, who can bid for the merger. Whether foreign airlines in a Joint Venture with Indian, or foreign partners should be allowed to take over the AI.
The National carrier still has the second largest fleet of aircraft’s among all domestic airlines. Standing at a fleet of 118 aircraft’s, only second to Indigo’s 135 air crafts.
It also flies most number of passengers overseas among all domestic carriers.
Air India failed to compete with low cost airlines such as Indigo and Spice Jet, who added capacity aggressively and acquired much of the fliers share.
AI’s customer share shrunk from 35% in 2006 to 13% this year.
The Tata group founder of AI is seen as a potential buyer. The panel will also decide how to make AI attractive enough for bidders with its debt of 52,000 crores.
The process of evaluating Air India’s assets will start simultaneously.
Air India has about 12,000 employees and its subsidiaries has around 19,000 employees.
The pilot union of AI is unopposed of the move; other employee unions are opposing the divestment.
The government says the future of the employees will be protected in the divestment process.
Indigo, India’s biggest airline, has expressed desire to buy a stake in Air India. Whereas the Tata Group along with Singapore Airlines had already tried bidding for AI in 2000.
Air India was founded in 1930’s by the then Head of Tata Group, JRD Tata.
Time will decide the fate of The Maharaja Carrier.