Government opts to go slow on Air India sell-off

With no suitors for Air India, the government is likely to go slow on a strategic sale of the national carrier till oil prices soften, and will instead focus on improving its operating efficiency.

At a meeting of the group of ministers with Union minister Arun Jaitley on Monday, the view was that the elevated prices of crude had resulted in no airline, including some of the stronger players such as Emirates and Qatar Airways, responding to even the expression of interest. As a result, sources suggested that the much-discussed disinvestment plan may be put on the backburner till global oil prices come down.

The group of ministers met to discuss the airline’s future after the failed divestment bid where it decided to offload the government’s stake in the Maharaja in small batches, while constantly trying to make it more attractive for potential bidders. “Oil prices are climbing up and, at such a time, trying to offload a stake in an airline is not easy. The focus now will be on making AI more efficient and ensure that it does not lose its market share. While doing so, we will slowly offload stake in the airline.

The postponement of the sale plan also means that the government, which has less than a year to go, will have to pump capital into the airline, which is saddled with loans of over Rs 50,000 crore, leaving a big hole in its accounts due to interest outgo.

While the disinvestment move did not see buyers lining up, equity infusion from the government dried up in this phase as it was felt that there will soon be a new owner. Also, four banks withdrew a Rs 1,000-crore loan. The combined impact has been a cash crunch for the airline where salaries are delayed and a host of economy measures have been announced, like making cabin crew share rooms.