Private airlines are hesitant to bid for Air India but it’s not the end for the privatisation process
First IndiGo pulled out of the process and then Jet Airways. However, that does not mean that Air India will remain lonely going forward. Far from it, indeed, the way the airline has been expanding its route network over the past few years under better management is commendable. The decision to buy 50 new Boeing aircraft might have been a controversial and expensive one, but it is paying off for the airline. After the United States temporarily barred passengers on middle-eastern carriers carrying personal electronic items on board, traffic on Air India on a slew of services to the United States shot up, so much so that the airline boosted its services to San Francisco. It has also added new routes to Australia, Spain, Denmark and recently started a pioneering route to Tel Aviv over Saudi airspace. Joining Star Alliance was also questioned but it appears the alliance has paid dividends for the airline. The argument could, therefore, be made that why the airline needs to be sold in the first placeIJ
The fact is that while this Government has allowed the airline to function sensibly as a commercial entity, there is no guarantee that future Governments will let the airline do so. Previous Governments have used the airline as a way to hand out personal favours. Not just discounted upgrades but for jobs as well as starting unviable routes. There is also the question of expensive airline leases via companies that have questionable credentials. Air India has proven that it can be run as a successful airline that while not competitive with the best in the world in terms of in-flight service, is certainly climbing up. Even though the airline will have a huge amount of cumulative losses, the Narendra Modi Government will not burden any eligible suitor with the whole load. Getting Air India off the Government books will not just get a lot of money for the Government but will make it easier for the it to handle its books. And the main reason why India’s private airlines pulled out have less to do with Air India but more to do with their own business models. IndiGo has a low-cost business model and absorbing Air India might have ruined that. Jet Airways, which struggled for a decade to absorb the erstwhile Sahara Airlines, might have thought once bitten, twice shy. There will be other suitors for the airline, and rather than lose hope for the carrier as some commentators have, the Government should continue to find an eligible spouse. Sometimes in an arranged marriage, the first choices are not always the best, usually far from it.
On another note, it appears that the debt-ridden Jaypee Infratech might have a bidding war going on between various companies. This is a good thing and like the bidding wars for other debt-ridden companies is a positive sign that the process of selling stressed assets is progressing. Banks, particularly public-sector banks will take a haircut no doubt and home buyers who ploughed their life-savings into homes might have to wait a little longer but the insolvency process is working. It might not be perfect as yet, but overall the economy is finally looking up.