Qrius
  • Business
    • Banking
    • Finance
    • Investment Guide
    • Policy
    • SMEs
    • Net Worth
    • Startup
    • Pros and Cons
  • World
    • Entertainment
    • Climate
    • Culture
    • Economy
    • History
    • Politics
    • Elections
    • Sports
      • Scrabble
    • Health
    • Lifestyle
  • Science & Technology
    • Archaeology
    • Nature
    • Space
    • Tech
    • AI
    • Fintech
    • Futuristic Technologies
    • IOT
  • India
    • Culture
    • Economy
    • History
    • Politics
    • Sports
    • Entertainment
    • Climate
    • Health
    • Lifestyle
  • Contributors
    • Digital Marketing Guest Post
    • Education Guest Post
    • Travel Guest Post
    • Fashion Guest Post
    • Fintech Guest Post
    • Health Guest Post
    • IOT Guest Post
    • Politics Guest Post
    • Sports Guest Post
    • AI Guest Post
    • Technology Guest Post
    • Literature Guest Post
  • Content Services
  • Business
    • Banking
    • Finance
    • Investment Guide
    • Policy
    • SMEs
    • Net Worth
    • Startup
    • Pros and Cons
  • World
    • Entertainment
    • Climate
    • Culture
    • Economy
    • History
    • Politics
    • Elections
    • Sports
      • Scrabble
    • Health
    • Lifestyle
  • Science & Technology
    • Archaeology
    • Nature
    • Space
    • Tech
    • AI
    • Fintech
    • Futuristic Technologies
    • IOT
  • India
    • Culture
    • Economy
    • History
    • Politics
    • Sports
    • Entertainment
    • Climate
    • Health
    • Lifestyle
  • Contributors
    • Digital Marketing Guest Post
    • Education Guest Post
    • Travel Guest Post
    • Fashion Guest Post
    • Fintech Guest Post
    • Health Guest Post
    • IOT Guest Post
    • Politics Guest Post
    • Sports Guest Post
    • AI Guest Post
    • Technology Guest Post
    • Literature Guest Post
  • Content Services
06 Mar, 17
06 Mar, 17

Not so Maharajah anymore: Air India and the privatisation agenda

Can the government save Air India by bankrupting it? Find out how the government plans to use the Insolvency Code to move out of Air India

By Zimble Digital

By Tariq Junaid

The Indian government is contemplating selling 51% of the state-owned carrier Air India which has been running in losses at a time when the airline market in India is experiencing rapid growth. What does this mean for the aviation industry?

The crown jewel defence

The government plans to push the airline towards bankruptcy first before selling it. The main reason behind this is the massive accumulated debt which cannot be covered just by outward funding. According to sources, the airline is $7 billion in debt. The creditors, who have taken up the task of formulating a viable way-out for the firm, had earlier suggested making an investment of $1.5 billion to convert the outstanding debt into 40% equity. The investment was aimed at lowering the interest burden, by a significant 25%, on the carrier. But the idea was later dropped as the business would still remain unsustainable.

Now, the government plans to implement the Insolvency Code and sever its ties with Air India in-order to instate the lenders as the sole business owners. The motive behind the move is that the lenders will forgo the loans in exchange for full control over the company and this would substantially decrease the cumulative debt on the firm. The transition is expected to reduce the total debt to $2 billion which is very likely to render a sustainable status to the business.

The big privatisation agenda

This is not the first time the government has decided to privatize the national carrier. The same scenario happened in 2000-01 when the Government slated 27 state-run firms for privatization, including Air India, aiming to improve the industrial base in the country by getting rid of loss-making state-owned enterprises. At that time, Singapore Airlines pulled out of its deal, citing losses incurred by the airlines over the last six years.

In the early 2000s, Air India’s main problem was inefficiency and unavailability of resources locally. It had three times as many staff per plane as global airlines which resulted in huge expenditure. While the rest of the airlines sector in India is enjoying stupendous air traffic growth which has remained above the 20%-mark month on month, throughout 2016, Air India dropped to its lowest share of the domestic market this calendar year in October to just 13%.

While nudging the company towards bankruptcy in-order to make it sustainable seems a viable option, the bigger task at hand is to find people who are willing to board this sinking ship. Air India, which faces a dysfunctional cost structuring and outstanding revenue problem, is considered as the one of the most unreliable airlines in the market. To compete against global airlines that have remained profitable over several years, an acquisition will be the best bet for the current stakeholders. For now, all we can hope is that the government ‘lands’ a deal that will help Air India ‘take off’.


Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius

About Author

Zimble Digital

Visit Homepage

what is qrius

Qrius reduces complexity. We explain the most important issues of our time, answering the question: "What does this mean for me?"


Featured articles

1

Before Christ

What Does BCE Mean? Difference between BCE, CE, BC and AD
2

GDP

Revealing the Top 10 GDP Countries of 2024: A Deep Dive into Global Economic Powerhouses
3

Android

The Ultimate Guide to the Best Car Racing Games for Android in 2024
4

cars

Best Family Car in India in 2024: Experience Memorable Journeys with Loved Ones
5

Extreme sports

Hidden Chess Rules: Elevate Your Game with Secret Strategies
6

adventure sports

Cristiano Ronaldo vs Lionel Messi: Why Cristiano Ronaldo Is Better
7

40 Top GK Questions: Boost Your Knowledge Quotient!
8

Why has increased productivity not led to more free time?
9

gita

Gita quotes on karma: Want to live your best life? Laws to live by…
10

Facebook

Facebook and Instagram down: What reason did Meta give?

About Qrius

  • About Us
  • Content Services
  • Contributors
  • Become a Contributor
  • Contact

Contribute

  • Digital Marketing Guest Post
  • Education Guest Post
  • Travel Guest Post
  • Fashion Guest Post
  • Fintech Guest Post
  • Health Guest Post
  • IOT Guest Post
  • Literature Guest Post
  • Politics Guest Post
  • Sports Guest Post
  • Technology Guest Post
  • AI Guest Post

Quick Links

  • World
  • Entertainment
  • Climate
  • Culture
  • Economy
  • History
  • Politics
  • Elections
  • Sports
  • Health
  • Lifestyle
  • Science & Tech
  • Archaeology
  • Nature
  • Space
  • Tech
  • AI
  • Fintech
  • Futuristic Technologies
  • IoT
  • India
  • Culture
  • Economy
  • History
  • Politics
  • Sports
  • Entertainment
  • Climate
  • Health
  • Lifestyle
2018 QRIUS. All Rights Reserved