Staff of Air India flight A321 welcome guests during the inauguration of the B777-200LR and Airbus 321at Indira Gandhi International Airport in New Delhi in 2007. (Photographer: Pankaj Nangia/Bloomberg News)

India Allows 49% Foreign Direct Investment In State-Run Air India

India allowed 49 percent foreign direct investment in Air India as it looks to sell part of its stake in the debt-ridden state-run carrier that’s staying afloat on a government bailout.

India allows foreign airlines to hold up to 49 percent stake in Indian carriers with the exception of Air India. That restriction has now been lifted by the cabinet, according to a government press statement. A substantial ownership and effective control of Air India will remain with Indian nationals, it said.

The move will not make much of a difference for the airline given the “issues” it has been facing, KN Shrivastava, former aviation secretary, told BloombergQuint.

Given the kind of debt burden it has, one doesn’t know if there will be prospective investors interested to pick up 49 percent stake in Air India. A part of the debt has to be taken over by the Government of India. Only then investors will be interested.
KN Shrivastava, Former Aviation Secretary

Air India had a total debt of about Rs 48,877 crore at the end of March 2017. The government has infused Rs 26,545 crore into the airline in five years, Minister of State for Civil Aviation Jayant Sinha said in response to a question in the Rajya Sabha. A group of ministers tasked with finding ways to explore state-run Air India’s divestment has decided to create a separate entity to pool in working capital loans and non-core assets of the national carrier.

“The government this time means business and will take the divestment process to its logical end,” said former Executive Director of Air India, Jitendra Bhargava.

Forty-nine percent [FDI] means more players can now bid for Air India. It will not be confined to a small, select group of airlines who are flying the Indian skies and say we are going to be bidding.
Jitendra Bhargava, Former ED, Air India

The airline is expected to report a net loss of Rs 3,579 crore for 2017-18, according to budget estimates, compared to a provisional net loss of Rs 3,643 crore for 2016-17. It is projected to increase operating profit to Rs 531 crore from Rs 215 crore in the previous year, as per latest numbers tabled in Parliament.