We reported a month ago how dire the domestic Indian aviation market is becoming, and now it seems Air India may get a bailout from the government.
This market is notoriously known for its crazy price war, with flights going as cheap as 0.02 cents each!
Why is Air India getting a bailout?
Air India is the national carrier of its namesake country.
It has 118 planes in its fleet, with 0 orders for more planes (Which is unusual for an airline, but makes sense as they can’t actually afford anymore).
The airline is officially bankrupt, and running as a service for its citizens. It is being propped up by taxpayers dollars and has to, unfortunately, compete with other carriers in the market (that operate much leaner and ultra-low-cost fares).
Air India has been under some controversy, as their director of safety was caught drunk before he was supposed to fly.
What was the government’s plan?
The government’s origional plan was to completely privatise the national carrier. The problem is, the airline is in $8 billion in debt and has not turned a profit in 10 years. You can imagine that that is quite a hard deal for potential buyers to swallow. The actual deal would have wiped away $5 billion USD, but anyone who bought it would inherit an aging fleet in a highly competitive market.
This lack of sale has been quite the setback for the Prime Minister, Narendra Modi, who is seeking to privatize much of the Indian country. It would have also secured him for his re-election next year, but this failure is not going to sit well with his party or voters it seems.
So, he has decided to put in place a new plan.
The current Prime Minister of India is seeking permission from parliment to invest $330 million USD into the ailing airline.
“The government has a four-part strategy for Air India — a financial package, a branding refresh, organizational and governance reforms, and a plan to motivate staff” – Jayant Sinha, junior aviation minister
The next step after delivering a financial package, the government would reform the airline significantly. It will undergo a whole branding refresh, organization and potentially a new business model.
This news is better than nothing, as recently Air India was under threat of having its fuel supply cut.
What do you think? Will this help solve the problem of Air India?