Air India privatization: NITI Aayog recommends unbundling airline and its real estate assets

New Delhi: Government think tank NITI Aayog has recommended that the privatization of Air India should be done only after unbundling the airline and its real estate assets.

“There are some things that NITI Aayog has suggested and NITI is just a recommending body. Essentially, what it has said is that you delink all the property and sell it off. You have domestic and international operations. It has said that you just sell off these three independently,” said a senior government official requesting anonymity.

Air India was merged with Indian Airlines in 2007 by the Congress-led United Progressive Alliance government.

The NITI Aayog’s recommendation comes against the backdrop of the government considering selling loss-making Air India, which has a 14% domestic market share and around Rs50,000 crore in accumulated debt.

NITI Aayog vice-chairman Arvind Panagariya told television channel CNBC-TV18 on Thursday that he expects the government to take some action on privatizing Air India in the next six months. “Something should be happening this year,” Panagariya said.

Air India has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations.

Apart from the planes, the airline also has vast land holdings, including nearly 32 acres in central Mumbai, besides its iconic headquarters on Marine Drive valued at more than Rs1,600 crore. It also has properties in New Delhi, London, Hong Kong, Nairobi, Japan and Mauritius.

“One firm can bid for both (domestic and international operations) because the segments are different,” added the official cited above.

The Times of India on 31 May reported that NITI Aayog has suggested that the real estate assets be hived off into a separate company before offering up to 100% equity to a strategic partner.

Addressing a press conference last month, civil aviation minister Ashok Gajapathi Raju said that NITI Aayog had recently submitted its recommendations on Air India to the ministry. “NITI Aayog has made recommendations for making Air India strong and viable. All courses of action are being examined. We have not closed any option,” Raju told reporters.

A committee including civil aviation secretary R.N. Choubey has sent its views on Air India’s divestment to the department of investment and public asset management.

The Union cabinet is expected to take a call on the stake sale shortly.

The airline has so far received Rs23,993 crore of the Rs30,231 crore equity infusion promised by the government under a financial restructuring plan introduced in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore in the previous year.

The Economic Survey 2017 had recommended that government should privatize Air India.

“Whilst there have been some improvements in its operating and commercial performance, the company does not yet have a viable business model or a clear long-term direction. And it remains hamstrung by massive debts,” aviation consulting firm CAPA Centre for Aviation said in its report late last month. “In such a highly competitive and challenging environment, Air India cannot continue to be funded by taxpayers to fight private capital.”

Spokespersons for NITI Aayog, the civil aviation ministry and finance ministry did not immediately respond to queries emailed on Thursday.

Air India declined to comment.

A civil aviation ministry official who did not want to be identified said the Air India matter is before the cabinet.