Listing possible? Corporatising Air India is not a sprint, it's a marathon

The government’s plan of listing Air India is an alternative which has come about after repeated failures in securing a strategic buyer for the airline. On Wednesday, Mint reported that the government is looking at a three-step plan to corporatise the beleaguered state-owned airline.

The first step is to get the banks to recast the airline’s working capital loan into equity by a consortium of lenders. Followed by appointing professionals to run the airline. The last step being its listing in the bourses. In March 2016, Business Standard had reported that the government will ask the lenders to exercise the option and cut its stake to 51 per cent when the airline’s books become better.

A bloated debt book and resistance from a strong employee union have made corporatisation of Air India a difficult venture. The government’s plan of listing the airline or finding a strategic private investor will entirely depend on how efficiently the airline can clean up its books; a process which has been botched due to some controversial decisions by the previous government. As things stand, the airline’s debt stands at a staggering Rs 46,000 crore. According to senior officials of the airline, the debt has been brought down over the previous year. "Last financial year, the debt had been reduced by Rs 5,000 crore, and it stands at Rs 46,000 crore at present," said a senior airline official. At the end of FY 2014-15, the debt stood at Rs 51,367 crore. It earned Rs 21,244 crore in the same financial year. Which means that a large part of its revenue went into debt servicing, leaving little for operational expenses.

In between, Air India Chairman and Managing Director Ashwani Lohani has written to the government, asking for more financial support. He is also in talks with the Life Insurance Corporation to raise more capital.

On resistance from the airline's employees, the government faced it first hand when its helicopter company Pawan Hans' employees opposed the decision for its strategic disinvestment. In a letter to the government, they opposed the move saying there was no need to privatise a profit-making company. Air India’s employee union (both of pilots and ground services) is much stronger and will have a much bigger say in any strategic decision about the airline. Further, the government would surely not like to face the unions' ire as general elections loom closer. Responding to a query by Business Standard regarding any privatisation plans, Lohani said "no way" as he refuted any such move strongly.

The airline reaped the benefit of a benign fuel price and was able to save a massive Rs 720 crore in the last financial year. In its attempt to gain market share from private airlines, it plans to order around 100 aircraft by this calendar year. Lohani said he is also looking to bring in a change in the public image of the airline, which he says has been very negative. "Branding is essential for a consumer-facing industry," said the bureaucrat who is credited for turning around the tourism corporation.

For now, the airline remains sarkari and the government of the day has a task on its hand in turning it around.