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The Cabinet recently approved the disinvestment plan for Air India and its five subsidiaries. It is being seen as Government’s one of the boldest reform moves till date. The Government is hopeful that the decision will attract a positive response and will revive Air India. The carrier has already been surviving on a bailout package. Last month, the NITI Aayog in its report had recommended the disinvestment of Air India therefore, the decision is very much in sync with NITI Aayog’s view. This decision does convey to the investors that India is serious about reforms and will not throw good money into something not working out well.

Some Facts:

  1. Arun Jaitley will head group of ministers to look into disinvestment process.
  2. Group of Ministers has been named Air India- Specific Alternative Mechanism.
  3. Ministers panel will decide on the extent of divestment and mode of carrying it out.
  4. NITI Aayog is looking into the issue, including a possible strategic sale.
  5. Civil Aviation Ministry was exploring all possible options for the ailing state run airline.
  6. Air India’s domestic passenger market has eroded over time.
  7. Air India’s market share today is around 14% while the debt is Rs.55,000 crore approximately.
  8. Air India is surviving on a bailout package of Rs.30,000 crore spread over 10 years. Bailout package was announced by UPA Government in 2012.
  9. NDA Government has continued with the annual equity infusion in Air India.
  10. India’s air passengers will grow to 442 million by 2035 and Air India surrendered profitable routes to private carriers.
  11. India is supposed to displace UK as the third largest aviation market by 2026 according to IATA.


This was a long standing demand on the reform checklist. Government money can be much better utilized to fund important social and infrastructure programmes that are actually in need of capital every year. There is still no clarity on how its sale will be conducted or else it will be fully privatized or not.

However, the best course of action has to be taken considering these factors:

  1. Treatment of unsustainable debt of Air India
  2. Hiving off of certain assets to a shell company;
  3. Demerger and strategic disinvestment of three profit-making subsidiaries;
  4. The quantum of disinvestment; and
  5. The universe of bidders.


The sale should be aimed at getting the best price for the airline. This can be achieved by allowing both domestic and foreign buyers to bid freely for stakes. The government will have to streamline its FDI policy so that foreign investors can buy a stake in Air India. The Civil Aviation Ministry has also made a case for the sale of non-core assets first to pay off existing creditors, so that the airline becomes more attractive to private buyers.

The Government might also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries:

  1. (MRO subsidiary) Air India Engineering Services Limited
  2. (Ground handling subsidiary) Air India Transport Services Limited
  3. Air India Charters Limited.

Its other subsidiaries are Airline Allied Services Ltd which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels) along with a joint venture AISATS. The Ministerial group is also considering hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step in this direction. How this disinvestment impacts UDAN Scheme is also something that has to be taken into consideration.


The need of the hour is a good assessment of Air India’s assets and liabilities plus a workable plan so that the airline can be made attractive to any prospective buyer.