Global airlines' bodies anxious about Air India's privatisation

Privatisation process should not distort competitiveness in aviation market, says Star Alliance

Global airlines' bodies have expressed concern over the debt-ridden Air India's disinvestment or privatisation, saying such a move should not "distort" the national carrier's competitiveness or affect its alliance with global players.

International Air Transport Association (IATA) chief Alexandre de Juniac, in an interview to PTI, parried questions on the proposals to privatise Air India, while observing that this was the second time such an announcement had been made.

Maintaining that "we don't have a position on that (privatisation)", de Juniac said "the government can do whatever they like with the airline, provided they do something which is competitive or competition-oriented. If there is no distortion in the market, it's okay. Then do it."

While the IATA has said that the national carrier's privatisation process should not "distort" competitiveness in the aviation market, the Star Alliance, of which Air India is a prime member, has said the ownership and control should not affect its network or lead to the "backdoor entry" of an airline into the grouping.

Talking to PTI on the issue, Star Alliance CEO Jeffrey Goh said, "if the ownership and effective control of Air India is within the Star Alliance family, we don't have a problem with that."

"If, however, the ownership and effective control is outside Star Alliance, we will need to review the situation to see whether it is still compatible with our strategy. Because if particularly it's an airline (which takes over Air India), we don't want the acquisition of one of our members becoming a back door entry into Star Alliance," Goh said.

Star Alliance is the biggest airline grouping, whose 28 member airlines serve 1,300 destinations with about 5,000 aircraft flying over 650 million passengers per year.

Besides Air India, its members include Lufthansa, Singapore Airlines, United, Air China, Air Canada, ANA, Swiss and South African Airways.

Goh said the national carrier had big challenges, not only in terms of a large organisation, but also "lots of financing or funding challenges, that is quite high, $8 billion."

Staying afloat on little over Rs 30,000 crore bail-out package extended by the previous UPA regime, Air India is saddled with nearly Rs 50,000 crore debt and is in discussions with lenders on ways to restructure the loans.

Earlier, a senior official said Air India had been bleeding due to huge debt overhang and if a solution can be reached on restructuring the debt that would be helpful.

"Debt restructuring would be one important component of the process," the official said, adding that Air India has been talking to banks for the last 4-5 months.

The officials remarks had come after a top government official said the Cabinet was expected to take a decision on whether to privatise Air India, whose financial situation is "very bad".

"For us, as the alliance, Air India is important because India is a huge market and AI provides us with connectivity to the domestic market. That's very important for us, without which of course, it's difficult to reach many domestic destinations of India," he said.

"So I think so far, so good with Air India. I think they obviously continue to enjoy a good time from the announcements to expand. They have announced Copenhagen, Stockholm, US and many other destinations," said Goh, who had earlier played a key role in getting Air India into the Star Alliance fold.