Privatization of Air India
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The document discusses whether privatization of Air India is a good idea. It provides background on Air India's history since its founding in 1932 and reasons for its downfall, including poor management, political interference, unplanned merger, and accumulating $7.8 billion in debt by 2016-2017. The document argues that privatization could improve operational efficiency, send a message about unprofitable public sector units, and increase competition in the aviation industry. Potential bidders for Air India like Indigo and Tata Group are mentioned. In conclusion, the document states that privatization is necessary to clear Air India's debt burden and allow it to function properly, even if it may be a bitter solution.
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Privatization of Air India
- 1. Maharaja of Misfortunes Is privatization of Air India a good idea? PRESENTED BY: SHREYA SINGH, IIMC NEW DELHI
- 2. History of the Company 1932: Founded by JRD Tata and called Tata Air service 1953: Indian government acquired major stakes. 1960: Purchased first Boeing 707-420 and entered jet age. 2001: Was set for disinvestment, but it failed due to global slowdown. 2014: Became the 27th member of Star alliance on 11th July. 1994: The airline was registered as Air India Ltd. 2011: Air India and Indian Airlines merged along with their subsidiaries to form Air India Limited. 2017: Air India at the verge of being privatized.
- 3. Reasons for the Downfall of Air India ❏ Poor management, labour dispute and political interference are one of the major reasons for the downfall of Air India. ❏ Financial mess faced by the company consistently for two years. It lost US$1 billion in FY 2008-2009 and US$ 1.5 in FY 2009-2010. ❏ Unplanned merger with India Airlines in 2007.The two airlines posted a combined loss of (US$ 1.0 billion) in 2009.
- 4. Reason for the Downfall of Air India ❏ The Top Bosses of Air India not having decision power as there will be ministry interventions which leads to lake of cohesiveness, focused, proactive and long term business planning. ❏ Air India racked up $7.8 billion USD in debt and an operating loss of $4 billion USD. ❏ The loss started in 2007 continued to rise with each passing year. In 2016-2017, the company reported a loss of Rs. 3,643 crore.
- 5. The solution: Privatization of Air India A privatized Air India could not possibly be worse and likely will be much better BECAUSE
- 6. Pros of Privatization Operational efficiency: Privatisation will infuse technology, capital, and private sectors management practices in system. Pro reform signals: The disinvestment will send a strong message to other loss making PSUs that the government is no longer ready to invest their good money after bad. Opportunity cost: In the case of air india, the cost is lot higher as it is consistently making losses and is dependent on the government for survival. Boom in aviation industry: Privatisation will increase competition in the aviation market, which in turn will improve the quality of services in air india
- 7. Who can bid for acquisition of Air India? ● The one who has at least 5 years of experience in providing similar advisory services for disinvestment, strategic sale, merger and acquisition activities, private equity transaction etc. ● Should have advised, handled or successfully completed at least one transition of merger, takeover, strategic disinvestment, private equity transition of the size of Rs. 4,000 crore or more.
- 8. Prospective bidders for Air India Bird Group: Interested only in only in the ground handling business of Air India. Turkey's Celebi: Shown interest in buying state-owned Air India’s ground handling operations. Indigo: Wrote letter to the Government Of India showing the its interest only in the International operations of Air India. Tata Group- No formal proposal has been made to the government for the acquisition of Air India. Although Natarajan Chandrasekran, Executive Chairman of Tata Sons said that the Company is considering to buy Air India.
- 9. Our take on the issueClear the balance sheet: The airline will never be able to function properly if it continues to be laden with old debts and interest burden. No involvement of Government: The government should exit Air India completely. The best owner for Air India: Tatas would the best fit for Air India. It would be an emotional match. Special Business Units, including MRO (Air India Engineering), catering (TajSATS), ground handling (both Air India Air Transport Services and AISATS) and Centaur Hotels, should be sold off separately to raise capital that can be used to retire debt.
- 10. Privatization could be bitter, but it is a life saving drug for Air India... THANK YOU….