After a botched sale, the Indian government might just bail Air India out again


  • There were no bidders for a 76% stake in the struggling national airline.
  • After an infusion of ₹21 billion into Air India last month, the Indian government is mulling a bailout package of ₹110 billion to keep the airline afloat.
  • If the government is able to turn around Air India’s operations after the bailout, it will look to restart the sale process or take the carrier public.
In June, the Indian government decided against privatising Air india after the planned sale of a 76% stake in the heavily-indebted national carrier failed to attract any bids. At the time, the government decided it would drum up the cash for Air India to maintain its daily operations and meet its short-term capital needs while it searched for a more permanent solution. A ₹21 billion capital infusion followed last month.

And now, it seems that the government has identified that solution, and its not going to make taxpayers happy. It is reportedly planning to bailout the struggling airline, which has around ₹520 billion worth of debts, to the tune of ₹110 billion. The plan is still in its initial stage, and is being discussed by officials from the finance ministry and ministry of civil aviation.

The bailout is meant to clean up Air India’s balance sheet so it can become an attractive enterprise again. In doing so, the government will be responsible for spearheading Air India’s turnaround and return to profitability.

How this will happen remains to be seen. There are no easy fixes. A bailout is far from a sureshot solution, as seen in the government’s ₹300 billion capital infusion into Air India in 2012.

There was speculation after the failed sale that it would consider letting go of the airline in its entirety, but it has decided against that. The most plausible scenario will see it having to settle for minimum interference, while holding onto its stake, and hiring experts from the aviation industry to implement changes to the airline’s operations.

If, however, by some miracle the government is able to turn around Air India’s operations after the bailout, it will look to mount a fresh sale of a stake in the carrier to a private investor. It could even opt for a public listing. However, given the insurmountable task that lies ahead for the government, both options look distant for the time being.
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