Could Air India Be Closed By The Indian Government?

Air India is India’s limping flag carrier. The airline has a lackluster product, is riddled with debt, and faces stiff domestic and international competition. Now, after failed privatization, the government may soon shut down the beleaguered airline.

Air India 787
Air India has failed to attract much interest in a privatization scheme. Photo: Tom Boon – Simple Flying

Air India failed privatization

The government made the decision to put Air India up for sale last year. And, at the conclusion of the process, there was not even one signal of interest from any prospective buyers. Even now, after the government altered some of the structure of the deal, buyers have not flocked towards the ailing flag carrier.

A320neo Air India
Air India has not been popular among buyers. Photo: Airbus

Will Air India fold?

In a Bloomberg report, Hardeep Singh Puri, the head of India’s civil aviation ministry, had the following to say:

Advertisement

The airline will have to close down if it is not privatized. Once we invite bids, then we’ll see how many bids will come in.

Advertisement

Unfortunately, this does not bode well for Air India which has billions of dollars of debt, a large staff, and a less-than-stellar reputation in the international marketplace.

Air India
Air India will need some fantastic incentives in order to attract a host of prospective buyers. Photo: Tom Boon – Simple Flying

Keeping Air India afloat is a polarizing topic in Indian aviation. In order to truly be competitive, Air India would need a significant cash investment. However, it appears that the government is getting a little unnerved by the financial pit that is the airline.

Advertisement

A restructured Air India offer?

The government is ready to give up its significant stake in the airline if a proper bid comes in from a true buyer. Moreover, the government is considering taking on $7 billion of the flag-carrier’s debt. This would be a significant move that shows the government’s interest in selling the airline.

Air India
The government is considering taking on billions of dollars of Air India’s debt. Photo: Steven Byles via Flickr

Should Air India stay afloat?

Air India is nowhere near as well-praised as the likes of Qatar, Emirates, or even Air France-KLM who are some big players in the Indian foreign aviation market. Furthermore, the reality that Air India outlasted Jet Airways is stunning given that Jet Airways had a far better onboard product and reputation than the flag-carrier.

Jet Airways
Jet Airways went bust earlier in 2019. Photo: Oliver Holzbauer via Flickr

Now, the next big competitors to Air India are SpiceJet, IndiGo, GoAir, and Vistara. Arguably, these airlines are better suited as private enterprises that compete across various segments of the market. Furthermore, with Air India still in the marketplace and, so far, continuing to receive government support, these carriers have to compete with an ailing carrier which is, frankly, on life support for the foreseeable future.

Airbus delivery of 1000th A320neo
IndiGo is poised to expand greatly. Photo: Airbus

Overall

Ultimately, the government will have the final say over what is happening with Air India. For now, no major prospective buyers have appeared while other ailing carriers, like Alitalia, have received some continued interest. Air India remains flying, but it is unclear exactly as to how long the airline can continue to fly given its current state of affairs.

Do you think the government should close down Air India? What are your thoughts on Air India? Let us know in the comments!

Advertisement

25
Leave a Reply

10 Comment threads
15 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
16 Comment authors
newest oldest most voted
Nick

Silly question that can be answered without reading the article. The simple answer being, yes, it owns it.

Phil

It would be smart to just close it down sell off the aircraft , pay the debts and start again. But if staring again it would be better to have a 51/49 ownership between the Government and a private company.

cahpek

You could say the same about that with Malaysia Airlines, but politics always get in the way when governments are involved. Great ideas they may be but governments will not do what you suggest, So, situations like this usually end up with the Tax-Payers having to foot the bill to the tune of $BILLIONS!!! Even with Alitalia. Although it is losing tons of money, the Italian govt. is considering NATIONALISING the airline. What for, to pump even more money into this lose-makikng financial black hole, you may ask? Politics mixing with Airline Business gets you CRAZY OUTCOMES!!! Back to the… Read more »

satyendra d Sharma

Same case with railways ,,,however they need a business model to run the show

satyendra d Sharma

After selling off ,govt shouldn’t try to restart the airline ,,,,it will cost them billions ,without business module

Mr HASSAN Y VAHED

Hey Phil. Those aircrafts are all probably leased, so unfortunately that’s not an option to take in extra $ towards the debt

Farhan Nazar

“the government is considering taking on $7 billion of the flag-carrier’s debt”

As if the government don’t have enough debt already…..

satyendra d Sharma

All debt ridden psu s should be closed down ,,,,only businesses which make 300% profit or above should exist .after all it’s taxpayers money

GG.

agreed

Gerry S

Air India clearly illustrates the overwhelming desires of nations to maintain a flag carrier. The “status” of such overrides the more practical practice of getting out while the getting is good. Fortunes are poured into clearly failing airlines. India, South Africa and Italy comes to mind.
Better to sell out at earliest opportunity rather than pile debt upon debt.
Air transport is now matter of course. Forget the “status” angle and think only profits of businness.

satyendra d Sharma

True that ,,, should close down railways as well ,,,they are running consistently in loss upto 1.5lakh crore every year ,,,,approx .people can travel by interstate buses,personal vehicles ,bikes etc .no losses for govt and our beloved 1.75% population of taxpayers .

Jack

The management could easily make AI profitable again if they just focused on the problems, but they seem to not be making any changes. For one, Alliance Air seems to be making just losses, so a total restructure or closure of that, and maybe the retiring of Air India’s 747-400 aircraft (even though that’s something I really don’t want to see) and replacing their 777-200LR with 787’s possibly. The closure or reduce frequency of some routes would be necessary too. Air India Express seems to be actually making money, so a look at their routes and their onboard product would… Read more »

Owen Berkeley-Hill

“The management could easily make AI profitable again.” Not sure this is easy because the so-called management’s hands are tied by strong unions who have more say with the management’s masters, the government. Air India was a great airline started by the Tata family. When it was nationalised (every newly independent country then wanted an airline as a status symbol) Prime Minister Nehru allowed the Tata’s to run the airline from Bombay. Unfortunately, over time succeeding governments wanted more and more control of the airline and it became a government plaything when the headquarters were transferred from Bombay (Mumbai) to… Read more »

satyendra d Sharma

Unions literally have no play in policies and mgmt decisions .however no mgmt school ever had airline business module
Profitability is next part ,,first of all try to break even .
Very expensive business ,,,cannot sell cheap fares ,,,if you want profits .
Only rich have right to fly ,,,regret to mention this ..
Profitable airline cannot afford to appease middleclass and poor

Owen Berkeley-Hill

“Only rich have right to fly.” Really? How do you define rich? $1 million, $10 million, $100 million or a billion? What is the world population of your definition of the rich? How do you reconcile this with the number of aircraft being ordered and the backlog of orders at both Airbus and Boeing? Do you suggest that all these aircraft must now be configured for only First and Business Class? If Air India took this on as a policy, what would its share be of routes such as BOM-LHR or DEL-JFK? I’m not sure Indians are any less price… Read more »

Gerry S

Thanks much for the history lesson, Owen. It is obvious that AI’s problems are self-inflicted. Sideline the founders and assume management? Beginning of the end.

satyendra d Sharma

Does management exist ????? Profitability can be possible only by sharing loads ,ensuring every acft flight is full,. with tickets of appropriate fares ,not to appease people ,but to be honestly doing business with profitable fares ,,,
Airfare should not be cheap as it is now .
No appeasement ,,,simply hardcore business .you have that kind of money ,spend and fly
Don’t expect cheap airfares ,,,,,,long run you may not have any airline ,,,,,,,think in depth

Rajendra Bansal

In my opinion, the AI has a monopoly in the aviation industry among the large population of Indian fliers and shouldn’t loose the money. In my lifetime, myself and my elder family members have traveled AI multiple times and every time i see that the flights are full and i still wonder how they are loosing the money. Instead of shutting down, The government of India should hire an international business analyst who are expert in the aviation industry and figure out what areas and sectors they are loosing and gaining the money. Restructure the areas that are money loosing… Read more »

Gerry S

Very good advice Raj, but years too late.

Owen Berkeley-Hill

Please read Jitender Bhargava’s book to understand that the decline of Air India has been going on for decades and has been inflicted by the government (mainly Congress), by a spineless management who took all their decisions after consulting the air minister, and by tthe unions. I was given a hard copy of the book by one of my MBA students a few years ago because I was interested and remembered a different airline. It was so depressing that just a chapter a session was enough to drive me into a very sad state of depression. Does it make sense… Read more »

Gomti Acharya P

Never,,, No. Airindia should always fly…..Its our national carrier …Maharaja is indias pride.

Vini

Absolutely right Maharaja is Indias pride. Moreover it is a national carrier .Thats why Mr Modi is taking Air India” s aircraft when he is travelling abroad ? Why this is Air India’ s condition ? Only because of Govt decision of buying more aircrafts and merging of Indian Airlines which was running in profit that time with Air India. Air India all flights are always going full.There are people who like Air India and their service . I do not understand why some people hate Air India so much being Indians they do not like Air India to travel.… Read more »

Kalpathy Raman

As ex-staffer of AirIndia in better times, I would like AI to continue flying. Deliberate bad policies of its routes, merger with Indian Airlines and rank political interference are the causes for its decline. Government shd try and revive the airline.

Scorpion

Exact prediction since the bjp govt.came in power india is on a very slippery slope and yet the people blindly follow . I would not care if it closed down at least we will see many more jobless .

Jyoti

No this is wrong decisions, if government close the airindia. It is national flagship, It’s all happened due to wrong decisions & havey interference of UPA 1 & 2, decisions takenby mr. Praful patel. Purchase of aircrafts, cream slaut given to private players, and unprofessionalism management of bureaucrats. Peoples have lots of expectation of current government to change the picture but, current government have only one vision, privatisation.. The people says it’s all about taxpayers’money who not born that time when airindia pay tax in foreign currency, and generate foreign revenue for Indian government. Lots of time airindia pay his… Read more »