CAPA India: Suspension of Air India divestment is a highly disappointing reversal

19 June, 2018

CAPA India stated (19-Jun-2018) the Indian Government's decision not to proceed with the divestment of Air India is a highly disappointing reversal of its earlier commitment to the privatisation of the national carrier. Under continued government ownership, with no clear roadmap, Air India is likely to see its domestic and international market shares decline over time to a point where the carrier is no longer relevant. In the meantime, losses will continue (estimated at USD1.5 billion to USD2.0 billion over the next two years alone), representing an unnecessary drain on tax payer funds, to subsidise a government business in an industry which is well-served by private operators. CAPA India noted that there will never be a perfect time for the privatisation of Air India because the nature of the transaction necessitates bold decisions. The more time that passes, the more difficult those decisions become. And if the government is neither able to structure a deal, nor has the appetite to fund losses, eventually the only other option may be closure. But for now, in light of today's decision, the government should at the very least focus on implementing comprehensive, enterprise-wide restructuring under a special administration to stem the losses significantly. Maintaining and funding the status quo would be the most unfortunate outcome, CAPA India concluded.