Submit Press release  · eTN Team ·  Advertising  ·  eTN Awards  - Worldtourism Events    

Air India

Government: No plans to divest its stake in loss-making Air India

Jul 10, 2009

NEW DELHI - India's federal government doesn't have any plan currently to divest its stake in loss-making national carrier, Air India, Civil Aviation Minister Praful Patel said Thursday.

The government also doesn't plan to make an initial public offering of shares of Air India, Mr. Patel said in response to queries by lawmakers in the lower house of Parliament.

"Presently, there is no such proposal," he said.

The government has been mulling an IPO for Air India for several years to raise money to buy new planes from Boeing Co. and Airbus as well as fund current operations.

In 2007, the government merged its two carriers - Indian Airlines Ltd. and Air India Ltd. - to create a larger airline to compete with Singapore Airlines Ltd., Lufthansa AG and other foreign carriers expanding into India. The government also wanted to secure better valuation with a merged entity during a public offering.

However, the global financial turmoil and falling stock markets led to a delay in the listing process of the new airline.

A slowing global economy and higher oil prices led Air India toward an estimated net loss of 50 billion rupees ($1.02 billion) in the fiscal year ended March 31, leading the airline to delay June salaries to all its 31,000 workers.

Mr. Patel said a comprehensive restructuring plan for Air India is under formulation, which may also include shrinking the size of new plane orders placed by Air India.

"All such issues could then be decided," he said.

The merged Air India inherited an order placed in 2005 for 111 planes - 68 Boeing and 43 Airbus - valued nearly $15 billion at list prices. The carrier currently has a total fleet of 150 planes.

The government has already initiated the process of revamping the airline's management in the next one month. It will also examine the possibility of shifting excess employees to existing or other newly created business units.

The current financial crunch led the state-run carrier to seek 39.81 billion rupees in financial assistance from the government last October, Mr. Patel said Tuesday.

The aid proposal comprised 12.31 billion rupees as an equity infusion and a loan of 27.50 billion rupees at an interest rate of 5%, payable over 15 years, he said.

The government has, in turn, asked the company for a firm proposal for the financial aid.

Government: No plans to divest its stake in loss-making Air India
Civil Aviation Minister Praful Patel / Image via


Premium Partners