Debt-Laden Air India Will Have to Shut Down If Sale Offer Flops
A successful Air India privatisation is crucial for the Narendra Modi government to help bridge a widening fiscal deficit.
(Bloomberg) -- India’s national carrier will have to shut down if a renewed attempt to sell the debt-laden airline fails to find a buyer, the country’s aviation minister said, a year and half after an attempt to sell the high-profile asset flopped.
“The airline will have to close down if it’s not privatized,” Hardeep Singh Puri told the Indian parliament on Wednesday. “Once we invite bids, then we’ll see how many bids will come in.”
A successful sale of Air India is crucial for Prime Minister Narendra Modi to help bridge a widening fiscal deficit exacerbated by dismal tax collections and a $20 billion corporate tax cut. Air India, which started as Tata Airlines in 1932 and later became state-owned, hasn’t made money since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The international carrier is saddled with $11 billion in debt.
A group of ministers overseeing the sale of Air India has already approved selling the entire government stake in the carrier and its low-cost, overseas unit, Puri said in a separate written reply to parliament. Pumping in more taxpayer funds into the airline in a competitive market “would not be the best use of scarce financial resources of the government,” Puri said.
Modi’s administration is considering a plan to exclude $7 billion of the airline’s debt in a bid to lure buyers, people with knowledge of the matter said earlier on Wednesday. The government may call for the so-called expression of interest as early as Dec. 15, they said.
Separately, India’s National Company Law Tribunal issued a notice to Air India on Wednesday, asking why bankruptcy proceedings shouldn’t be initiated against the state-owned carrier, in response to a pilot’s petition seeking outstanding salary dues, according to people with knowledge of the order.
Air India and its Maharaja mascot have become synonymous with Indian pride over the years. Founded by Jehangir Ratanji Dadabhoy Tata, Air India took off flying mail between Karachi and Bombay in then-undivided British India. Once it turned commercial, the airline quickly became popular with its advertisements featuring Bollywood actresses, high-end champagne and Salvador Dali-designed porcelain ashtrays.
To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Abhay Singh, Arijit Ghosh
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