Could Air India Be Closed By The Indian Government?

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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:

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.

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.

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.

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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.

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

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