From Air India to partially foreign-owned airline?

Foreign ownership might soon be a reality for Air India as the government pilots efforts to privatise the ailing national airline and turnaround its flagging fortunes similar to the likes of British Airways and Qantas.
More than eight decades after making its debut as a carrier of mails, the government today allowed foreign direct investment of up to 49 per cent in the debt-laden Maharaja -- a move that sends out an "important message" to global investors and is expected to attract more bidders.
Describing Air India as a lovely airline with awful finances, Civil Aviation Minister Ashok Gajapathi Raju said that professional management can help revive the airline.

Few hours after the Cabinet decided to relax the FDI norms in the case of Air India, Raju said a preferential treatment that was extended to the carrier has been removed.
"So-called privatisation of so many airlines has been done in the past in a lot of countries... it has taken time for them to come across. The classic examples are British Airways and Qantas," he told PTI in an interview today.
State-owned British Airways and Australia's Qantas were privatised, which also saw revival of their fortunes.

A group of ministers is working on the modalities for strategic disinvestment of Air India, which has been in the red for long and the expression of interest from bidders are expected to be invited soon.

The latest decision to permit up to 49 per cent FDI -- including by foreign carriers -- directly or indirectly in Air India brings it at par with other domestic airlines.
Till now, 49 per cent FDI was allowed for all local carriers but not for Air India.
"Another is that it (Air India) has (now) come up on par with other airlines within the country. So, in a way it is not a differential treatment, rather the preference that was there (has been removed)," Raju said about the FDI norms relaxation.
A senior civil aviation ministry official said that allowing FDI in Air India is a "considered decision" and will send out an important message to global investors.

While FDI has been permitted in the airline, the government has made it clear that substantial ownership and effective control of Air India would continue to be vested with an Indian national.
The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction.
It represents more than 275 airlines comprising 83 per cent of global air traffic.
"The amendment in the FDI policy is a step in the right direction -- it removes the exemption that had been prevalent in the policy which is related to a single airline.

"At the same time, it is important that the government ensures that airlines in India have the most conducive operating and regulatory environment to compete effectively," Albert Tjoeng, Assistant Director of Corporate Communications, (Asia Pacific) at IATA, said in a statement.
Aviation think tank CAPA welcomed the decision to allow foreign airlines to invest up to 49 per cent in Air India.
"Expect a significant interest from foreign airlines though the offer and conditions attached will determine the level of participation in the bids. See 4-6 serious bids for Air India subject to bid conditions," CAPA South Asia CEO and Director Kapil Kaul said in a statement.

Singapore Airlines today said it is keeping options open on AI disinvestment.
Last month, Minister of State for Civil Aviation Jayant Sinha had said that around the world most public sector airlines like Lufthansa, British Airways and Qantas have all been disinvested by their governments.
"They are now actually private sector airlines because the private sector can run airlines far better than government running them. That is why we are also going through the strategic disinvestment process with Air India," he had said at an event in Mumbai.
The government's latest decision related to Air India attracted strong criticism from the Congress and the Left.

"Interesting-Commandeer a low valuation report,sell Air India to a crony oligarch who in turn disinvests 49 per cent to a foreign airline at hefty premium. Gives management rights in the shareholder's agreement to foreign airline & pockets 51 per cent equity virtually for free. Abracadabra," Congress spokesperson Manish Tewari said in a tweet.
The Parliamentary Standing Committee on Transport, Tourism and Culture concluded that the government should review its decision to privatise or disinvest Air India and explore the possibility of "an alternative to disinvestment of our national carrier which is our national pride".
Air India, which is staying afloat on taxpayers' money, is estimated to have a debt burden of more than Rs 50,000 crore.