Table of Contents
AIR INDIA DISINVESTMENT
•The airline had reported losses for six straight years.
•Air India’s debt
•It was bailed out with $5.8 billion of taxpayer money in 2012.
•More than 18,000 workers were on its rolls for a fleet of just about two dozen planes.
DEBT
• The airline’s accounting process also came under scrutiny recently when former Civil Aviation Minister Ashok Gajapathi Raju said that company’s debt could turn out to be 40 per cent
higher than previously expected, as the airline’s books have not been evaluated properly. “When our exercise of calculating Air India’s debt began, we found that the sum was hovering around the Rs 50,000 crore (Rs 500 billion) mark. But I won’t be surprised if the total debt reaches Rs 70,000 crore (Rs 700 billion). Since people are looking at the books carefully, they
may find more,” the minister had said.
NOTES
The government announced on May 31 that at the end of the deadline for
submitting Expressions of Interest (EoIs), it had received no bids from any entity to
acquire 76% stake in Air India.
WORKFORCE
•Air India is hopelessly overstaffed: It has 27,000 employees and is hiring even more. Of these,
11,214 are “permanent,” meaning that they’re protected by labor laws that are among the most
inflexible in the world — government permission would be required to fire any of them.
AIR INDIA PROBLEMS HIGHEST EMPLOYEE TO AIR PLANE RATIO NOTES
• AI had 26,978 employees (including permanent, contractual, casual, and on-deputation staff) for a fleet of 115 aircraft — or 234 employees per aircraft.
• In comparison, as of March 31, 2017, IndiGo had 111employees per aircraft (for its fleet of 131), Jet Airways had 142 (for a fleet of 112 aircraft), and low-cost carrier SpiceJet,
140 (for 49 planes). The employees-per-aircraft ratio is a key metric used in the industry to identify the operational efficiency of an airline.
24% ISSUE
Air India board will also have members of the government.
WHY AIR INDIA DIDN’T SELL
•World scenario
•Last year government
•Financial scenario of Air India
IPO IS AN OPTION
•By selling shares in an initial public offering, the state can retain control of Air India Ltd. and also raise cash to fund its operations.
•The government may consider a proposal to write off part of Air India’s huge loan overhang before issuing an IPO in a bid to make the ailing airline attractive.
PROBLEMS
• As per existing rule of the markets regulator SEBI, any initial public offer can be made for a company which has reported a net profit for at least three preceding years. In the case of Air
India, there has not been a single year of profit in more than a decade.
• Not since the two erstwhile airlines – Air India (international) and Indian Airlines (largely domestic) merged to form the present entity has there ever been a net profit.
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