Indian Government May Divest Upto 51% Stake in Air India

Bloomberg Quint is quoting unnamed sources that Indian government is planning to sell upto 51% of its stake in Air India. Air India has been in the red for quite a few years now, Indian government tried to bail it out using tax payer’s money however, it seems that hasn’t worked out. Air India had a profitable (operating profit) quarter recently due to lower fuel prices, it has also been launching quite a few international routes but unfortunately both the hard and soft product are far from competitive. As such, it remains a loss making business for the government.

Probbaly in the presence of 5/20 rule, it could have been a nice way for Air Vistara to get a licence to operate on International routes. The 5/20 rule required an airline to have at least 20 planes and 5 years of domestic flying before being able to fly internationally. But the 5/20 rule is not applicable anymore. With all its debt, I think it will be difficult for the Indian government to find a suitor if it is indeed deciding to sell its stake in Air India. In fact, Indian aviation minister himself has said – “Its books are so bad. I don’t think that even if it is offered, anybody would come for it.”

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