Air India will have to shut shop if privatisation flops: Minister Puri

Government is considering a plan to exclude more than half of Air India's $11 billion of debt in the government's latest attempt to lure investors to the struggling carrier, said sources

Air India will have to shut down if a renewed attempt to sell the debt-laden airline fails to find a buyer, the country’s aviation minister said, a year and half after an attempt to sell the high-profile asset flopped.

“The airline will have to close down if it’s not privatised,” Hardeep Singh Puri told the Indian parliament on Wednesday. “Once we invite bids, then we’ll see how many bids will come in.”

A successful sale of Air India is crucial for Prime Minister Narendra Modi to help bridge a widening fiscal deficit exacerbated by dismal tax collections and a $20 billion corporate tax cut. Air India, which started as Tata Airlines in 1932 and later became state-owned, hasn’t made money since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The international carrier is saddled with $11 billion in debt.

A group of ministers overseeing the sale of Air India has already approved selling the entire government stake in the carrier and its low-cost, overseas unit, Puri said in a separate written reply to parliament. Pumping in more taxpayer funds into the airline in a competitive market “would not be the best use of scarce financial resources of the government,” Puri said.

Separately, India’s National Company Law Tribunal issued a notice to Air India on Wednesday, asking why bankruptcy proceedings shouldn’t be initiated against the state-owned carrier, in response to a pilot’s petition seeking outstanding salary dues, according to people with knowledge of the order.

Air India and its Maharaja mascot have become synonymous with Indian pride over the years. Founded by Jehangir Ratanji Dadabhoy Tata, Air India took off flying mail between Karachi and Bombay in then-undivided British India. Once it turned commercial, the airline quickly became popular with its advertisements featuring Bollywood actresses, high-end champagne and Salvador Dali-designed porcelain ashtrays.

Government considering to exclude $7 billion of debt 

Government is considering a plan to exclude more than half of Air India’s $11 billion of debt in the government’s latest attempt to lure investors to the struggling carrier, people with knowledge of the matter said.

Prime Minister Narendra Modi’s administration plans to ask proposed investors to take over 300 billion rupees of the airline’s debt, which are backed by the carrier’s aircraft, the people said, asking not to be identified, citing private information. The government may call for the so-called expression of interest as early as Dec. 15, the people said.

The administration is keen to sell the company to help bridge a widening fiscal deficit following dismal tax collections and cuts to corporate tax rates worth $20 billion. Last week, the government decided to sell its entire stake in the country’s second-largest state refiner, and its biggest shipping company.