2018: Will finally Air India go to private hands?

If domestic aviation market reaching a new high by flying 10 crore passengers this year, 2018 will have the big story in Air India when the government disinvest its stakes in the national carrier.

The Group of Ministers (GoM) under Finance Minister Arun Jaitley is burning the midnight oil to finalise the contours of the strategic disinvestment of the national carrier, which has amassed a loss of over Rs 50,000 crore.

The industry will be keenly watching the developments on Air India early next year and how much money the government would earn through divesting its stakes. There will be intensive bidding for the national carrier and the winner may end up marching ahead with a substantive slice of the market.


It was just a week before the government decided on disinvesting Air India on June 28 that the Directorate General of Civil Aviation, the country’s aviation regulator, came up with a figure that lit up the industry’s mood. It said, for the first time in country’s aviation history, domestic carriers flew more than one crore passengers (in May) in a month.

This feat was repeated again in November at 1.05 crore and it led to breaching another landmark. This time, Indian carriers carried more than 10 crore fliers for the first time in a calender year.

Then came the rolling out of Regional Connectivity Scheme or UDAN to connect otherwise unconnected small towns by air. Fares were capped at Rs 2,500 crore for a one-hour-long flight as per the scheme and around 80 unused or under-used airports were connected.

If these presented the rosy picture for the sector, all was not easy for the carriers and their staff. Fliers were becoming more aggressive and staff were at the receiving end, airlines claimed while passengers faulted “uncouth” behaviour.

History was created when the government came out with a ‘no-fly list’ for the first time after repeated incidents of misbehaviour with airline staff. The slapping of an Air India airport manager by Shiv Sena MP Ravindra Gaikwad triggered an avalanche of protests, leading to the government finalising the contours of putting erratic and violent fliers on the check.

However, such incidents did not deter the airlines from expanding their fleet. Market leader IndiGo announced its plans to 50 ATR turbo-prop planes, a deal that could run into USD 1.3 billion at list price, with an aim to tap the regional aviation market. SpiceJet, GoAir and Jet Airways are also expecting more planes in their fleet next year.

Next year could see better finances for the domestic airlines. Credit rating agency ICRA has recently said that domestic airlines are expected to reduce losses this fiscal ending March riding on healthy seat occupancy coupled by a moderation in capacity, rise in tourism demand and economic environment.

However, it has warned that inadequate aviation infrastructure, which has constrained the performance of airlines, remained a bottleneck. This would be one area where the government would have to work on.

(An edited version appeared in Deccan Herald on Dec 28, 2017)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: