India’s aviation market has been a mess. Jet Airways is out of business. oneworld member Kingfisher is no more. And Star Alliance member Air India is teetering on the edge of bankruptcy.
The government-owned airline is currently surviving on subsidies while the country looks for a buyer to take over the flag carrier. It’s expected that the government would retain the airline’s $8.4 billion in debts, while the new owner would take the Star Alliance member airline nearly debt-free. The government just wants to stop additional bleeding. Last year India offered to sell 76% of the airline. Now they’re open to selling the whole thing in addition to retaining debt.
Air India has suffered decades of corruption. For instance the airline owned tens of millions of dollars worth of art, much of which was ‘lent’ to executives to display in their homes and went missing. They’ve tried cost cuts, like making flight attendants share hotel rooms, and revenue protection plans like telling employees not to upgrade their friends anymore. That hasn’t done the trick.
Over the summer six airports refused to sell fuel to Air India afraid of ever getting paid. They don’t have sufficient funds to get 12 grounded Airbus A320s in need of engine replacement back into the sky.
As the Indian government shops the airline, now there’s word that if they can’t find a buyer they may have to just shut it down in six months.
Sounding alarm bells, the official said Air India might well go Jet Airways way if a prospective buyer does not come on board by June next year.
…”We are some how managing the operations at present and at best we can sustain this situation till June. If a buyer does not come by that time, we will have to shut shop,” said the official on condition of anonymity.
Air India Boeing 777-200LR, Copyright: boarding1now / 123RF Stock Photo
A major stumbling block is that the government is seeking a privatization deal that fully protects the airline’s 9400 employees and 4200 contract workers. The government has publicly promised not to inject additional funds into the airline, beyond those already committed.
Since there’s little hope that current management will turn around the airline that means either a change in control or shutting down Air India. In reality the government will have to blink, either with additional funds or with the terms under which it sells the airline.
Here’s what it’s like flying Air India when they don’t spend money to fix the air conditioning.
— ANI (@ANI) July 3, 2017