Air India revival: some questions still remain unanswered

New Delhi: The group or company which had shown initial interest in revival of Air India has developed cold feet. The main reason for lack enthusiasm now is the absence of clarity on the debt burden carried by the " white elephant".

The national carrier has debt to the tune of Rs 52,000 crores out of which Rs 22,000 is working capital loan. The government has not given any indication so far as to how it wants to deal with it.

One way is write off but that will increase its own burden. It has drawn a road-map for reducing the budget deficit. The writing off will upset the plan. The other is to restructure working capital loan.

The company which operates IndiGo was one of the airlines which had shown interest soon after the government announcement its proposal regarding Air India. The Tata group was another. No reaction is available from the Tatas but the indication so far is that IndiGo may be out of the race if the government does not find a suitable solution to the debt issue.

The government has three options: to reduce its stake to zero, bring down its share to 74 per cent or cut its down to below 50 per cent. Three of the five subsidiaries of Air India are in good shape. They can easily find investors who believe in " cherry-picking". Money collected from stake sale in these companies can help the government clear a part of the debt. But most of business experts disfavour this arrangement.

The Niti Aayog and some other bodies have expressed themselves in favour of 100 per cent disinvestment. The subsidiaries which are not making losses may find buyers but the task is not easy for others. Therefore the best option is to put it on the block.

Buying of additional aircrafts which were not needed and merger of the Indian Airline, which was a market leader until 2001 with the Air India in 2007 , were two main reasons for the current situation in which the carrier finds itself.

The new Avtar after the merger has been also charged with fudging figures and reporting profit which actually was a mirage. The Comptroller and Auditor General too has not supported the profit report.

In any case, the disinvestment decision has not come a day too soon. It should have been taken a long time back. This is as true for this entity as for any other. The government should try to revive an ailing company but it should withdraw itself if it finds the objective impossible to achieve..

One positive is that the staff fleet ratio is much lower in Air India than some other airlines. The ratio is 106 for one aircraft. While it can please an investor, its market share (14 per cent ) can cause him worry.

The government has appointed a committed headed by finance minister Arun Jaitley to suggest ways and means to turn it around. Members of the committee include railway minister Suresh Prabhu and power minister Piyush Goyal . But the committee has been given six months, to do the cost-benefit analysis and study other aspects, which is long.

The other worry is that this committee's report prepared even after this long period may not see the light of the day. Reports of many such committees are catching dust. What keeps the hope alive, however, is that this government means business and has often proved doubting Thomases wrong . It may happen once again.

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