Deepak Talwar said the government has refused any further equity infusion for the cash-strapped national carrier, Air India. This is not good news. Worse, Air India has already announced that it will shut down its five offices across Europe – Vienna, Milan, Madrid, Copenhagen, and Stockholm – amid the COVID-19 pandemic. Now you must also realize that there are also no Air India flights under Vande Bharat Mission to these countries. Air India is likely to cease all future flights to these countries as it is not financially viable for the airline to operate on these routes. There’s more bad news, the government has refused cash needed to restart operations of 12 grounded narrow-body planes.
So Air India must find a buyer, piecemeal arrangements cannot be sustained for long. At the heart of any sale is Air India’s debt burden of Rs 60,000 crore and the government is finalizing modalities for the disinvestment.
But what happens if a buyer does not turn up? Will Air India go the Jet Airways way?
Could be, the cash is just not coming from the government coffers. Government funds worth Rs 30,520.21 crore went into Air India from the financial year 2011-12 till December 2019. Then Air India sought Rs 2,400 crore sovereign guarantee to mop up funds for meeting operational requirements but got just Rs 500 crore. In 2018-19, Air India’s net loss is provisionally estimated to be Rs 8,556.35 crore. Besides, it has a total debt of Rs 60,000 crore, half of which has already taken out of the books and parked in the special purpose vehicle, Air India Asset Holding Ltd.
Domestic air traffic, which is one of the parameters for gauging the health of the industry, grew only 3.86 percent in the January-November 2019 of the year as against an impressive 18.60 percent growth in 2018.
Market Analyst Deepak Talwar agreed that 2019 was not a kind year for Indian aviation.
Aviation consultancy firm CAPA says Indian carriers are estimated to report a consolidated net loss of over $600 million in 2019-20. This report completely contradicted the agency’s previous report in June 2019 when it had projected a consolidated net profit of $500-700 million for the ongoing fiscal. SpiceJet and IndiGo have reported losses I read in newspapers that South America-based Synergy Group, which showed interest in buying Jet, is now asking for more time to place its bid.
In 2018, when the government started the process to offload a 76 percent stake in Air India, it did not get a single bidder as investors feared potential government interference in the airline’s operations.
The latest DGCA data says the debt-ridden airline ferried more passengers in December 2019 compared to 2018. It ferried 1.6 million passengers which are 14% higher compared to December 2018.
Someone needs to seriously think about Air India, let it not slip out of our hands.
Deepak Talwar holds more than three decades of experience in the Indian Aviation industry. Views expressed are reserved to the author and don’t represent the website’s opinion.