When Air India Was Privatised, Almost
Why Air India’s divestment fell through 15 years ago.
For Pradip Baijal, Air India Ltd. has come full circle.
The former divestment secretary in the Atal Bihari Vajpayee-led NDA government (1999-2004) had almost scripted the sale of the state-run carrier. A decade and a half later, the loss-making airline has again attracted interest from a possible investor – India’s largest carrier IndiGo.
Baijal and his team were involved in the privatisation of public sector companies like Videsh Sanchar Nigam Ltd., Indian Petrochemicals Corporation Ltd. and Maruti Udyog Ltd. (now Maruti Suzuki Ltd.) during Vajpayee’s term.
In 2002, a consortium of Tata Group and Singapore Airlines was also in advanced stages of a deal with the government to buy a majority stake in Air India. They had almost completed due diligence, Baijal told BloombergQuint in a Skype interview from New Delhi.
The 2001 bombing of Bandaranaike Airport in Colombo by the Liberation Tigers of Tamil Eelam destroyed several aircraft of Singapore Airlines. Its investments in Air New Zealand and Air Australia were facing several problems, Baijal said. The consortium decided to pull out at the last minute, he said.
Emails sent to Tata Sons Ltd., the holding company for Tata Group entities, didn’t elicit a response, while Singapore Airlines refused to comment.
The two set up full-service airline Vistara, which started operations last year. The Tata Group also tied up with Tony Fernandes-led Air Asia to start low-cost carrier AirAsia India.
Much has changed at Air India after the government’s first effort to privatise it failed. From 18 planes, the carrier has grown to own a fleet of 180. Debt was not a concern in 2002, but has now increased to more than Rs 50,000 crore.
With the airline’s losses mounting, the government in 2012 approved a turnaround plan to infuse Rs 30,000 crore by 2021, subject to the carrier achieving certain milestones. The government has so far pumped in Rs 24,745 crore, according to a written reply to a question in the Lok Sabha.
Even with its huge debt, Baijal is optimistic about the government’s latest effort to divest its stake in Air India.
It’s a very positive development and I hope it goes through, but it’s a tough job and requires a lot of due diligence from the buyer and the seller.Pradip Baijal, Former Divestment Secretary