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‘Air India will regain its lost place in domestic, int’l skies’

Hindustan Times logo Hindustan Times 28-01-2022 Neha Tripathi

New Delhi: Air India’s successful disinvestment process was completed this week, with the Tata Group formally taking over the airline on Thursday. In light of this landmark development, Union civil aviation minister Jyotiraditya Scindia spoke to Neha LM Tripathi about the move, and what it means for India’s aviation sector. Edited excerpts:

The Air India disinvestment must have been an extremely difficult process. How did you achieve it?

First of all, the commitment, directive and the strong decision-making capability of the Prime Minister is what gave us the confidence to go ahead with this process. Having said that, an arm of the ministry of finance, which is DIPAM (Department of Investment and Public Asset Management) and my ministry worked in very close concert with each other to ensure the success of this transaction.

What we have also learned through this transaction is the importance of the iterative process that we have followed as we went about concluding it successfully. And so initially, we talked about 76% sale of Air India, which then went up to a golden share possibility to the 100% stake route. We looked at the full debt being taken over by the owners, then a proportion of debt, and then finally, to a formula on an enterprise value (EV) basis -- with 15% to be given in cash and 85% to be debt takeover.

So the first lesson that you learn is that this process has to be iterative, it has to be consultative, as you go along, and keep refining the process. And I think that the outlook of the government is something that has really helped in terms of making this transaction happen. So we’ve put that notion across that we are a flexible government, and we are a government that wants to see the best outcome possible.

I’d like to wish the new owners, the Tatas, the very best, I’m very confident that under their stewardship and leadership, and also their capability both on an HR strategy front and a financial front, they will make a great success of Air India. In times to come, Air India will regain its lost place not only in our domestic skies, but in international skies as well.

What does this privatisation process mean to the aviation sector, which we know has been hit by the pandemic?

The positivity of this transaction and the positive spin-offs are for each stakeholder in this ecosystem. The government had close to 83,000 crore in losses (from Air India) over the last 14 years. There was the merger of Air India and Indian Airlines with an equity infusion of 54,000 crores over the last 14 years; and government guarantee of another 53,000 crores. This is about an additional 107,000 crores. And then look at a debt burden of close to 60,000 crore to 65,000 crore. So about 2.5 lakh crore of taxpayers’ money was directed towards keeping this enterprise afloat, and also losses of close to 20 crore a day, which is 7,500 crore per year for the last three-and-a-half years or so. Hence, first of all, there will be better utilisation of taxpayers’ money and government resources towards productive purposes across sectors, be it in social welfare or infrastructure.

As far as the civil aviation sector is concerned, there, too, we had a very skewed market in terms of the number of players and very marginal shares. We will now have a player with rather decent amount of market share, in addition to the major player in the market, and therefore you’re going to see some consolidation taking place.

For the customer also, it’s a win-win situation, because you’re going to see much better value proposition coming forward. The Tatas are already talking about on-time performance, greater facilities on board, better in-flight menu. So all of these initiatives that they’re taking, I’m sure that at the end of the day, you will have a win-win situation across the board.

On the macro question that you asked with regards to aviation, we have gone through a very difficult time with Alpha and Delta waves of Covid. When I took charge on July 7 last year, we were operating with 50-60% capacity, and we have slowly grown that to 100% capacity by October 18, 2021. In November- December, we were operating close to what were pre-Covid levels of annual traffic with close to 400,000 passengers per day. Then Omicron hit, and it has been another serious body blow. But I have confidence that we will re-emerge as a key centre for infrastructure, transportation and travel once we pass this phase.

When can we see international operations resuming?

All that will depend on Omicron. It’s something that we were contemplating very seriously. Opening of international operations is on the table, and are looking at it on a daily basis, but we will need for things to stabilise with regard to Covid.

Having said that, all the air bubbles are still functioning, and even international traffic to and fro is still ongoing. Certainly not compared to the pre-Covid levels but we hope to get there soon. So again, the impetus will be to stabilise and bring back 100% passengers in the domestic sector, and side by side also look at opening up international travel.

Coming back to Air India, what will to be like not having a national carrier?

I think every carrier with an Indian flag is part of our nation, and I’m very confident that Air India -- which is certainly etched into my heart and probably if I may be presumptuous to say, is also into your heart -- will continue to occupy that place. Even though it is in the private sector’s hands, in any case it is in the hands of its erstwhile owners who germinated it and conceptualised Air India.

What about Air India’s engineering arm? There’s been talk of putting that on sale.

At this point, the four remaining subsidiaries of Air India and all the non-core assets of Air India itself -- land, buildings, all other assets, have been moved into the holding company (Air India Assets Holding Ltd) funded by equity by the government. Another fact that should be placed on record is that all liabilities of Air India have been taken care of prior to changing hands. So, the roughly 65,000 crore worth of debt, sale and leaseback costs that had to be endured by Air India and other non-convertible debentures have been cleared by the government of India and the ministry of finance. Hence, that balance sheet is completely clean, and so is the balance sheet of Air India Assets Holding Ltd completely clean.The transaction being a success is one great achievement, but what is remaining being completely clean and all loose ends tied up, is another great achievement.

All of us were a bit nostalgic that AI has been privatised...

Well, I have wonderful memories with Air India, from the age of probably three or four. Having said that, I believe Air India is not only in safe hands, but in very good hands. Hands that modelled the shape of this airline into a trendsetter in the international market. I’m very confident that it will create a tremendous amount of value, not only for its customers and it stakeholders, but also for India as a country, and exhibit our soft power tremendously in the years to come.

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