Market makes Air India attractive; Govt control tough
Global aviation industry expects Indian government to divest 74% of Air India though their wishful thinking is for a complete 100% privatization.
Investors feel Air India would be a good acquisition, given its assets including around 150 aircraft, lucractive routes and airport slots in important destinations.
The acquisition deal, if materialized, would also be backed by the massive growth of 20+% in the Indian domestic market and potential of 15+% on international routes.
The investors, albeit a handful, would be reticent if the Indian government, at the least, retains 26% plus protection with influence on its strategic commercial decisions and not allowing intenrational carriers freedom to compete in the Indian market.
“If Air India is privatzed, the policy setting rules will improve,” believes Binit Somaia, director for South Asia at the Sydney-based Centre for Aviation (CAPA).
A lot more of work is being done on the ground to debottleneck the aviation infrastructure, with studies on the airport capacities and the scope of expansion, route constrains at major airports in the country, skilling the workforce and adding more technologies.
Sandeep Bahl, Program Director of the US-India Aviation Cooperation Program, said: “We are trying to help improve the utlization of that (shortage of) infrastructure whether the current set up is suitable for expansion,” he said, adding that a wide range of skilling, training and capacity building progamms were being undertake on bilateral basis.
But according to delegates at the CAPA Global LCC Summit, held in Singapore 1-3 Mar 2018, the Air India privatization or divestment has been slowed, and is not likely to happen this year.
Aviation investors such as cash-rich Singapore Airlines and Emirates, waiting for details of Air India offer, wants an unconditional commercial control in operating the national carrier to make it profitable.
They are also keen on getting more landing rights for their airlines in India or even “Open Sky”, reviving a two-decade old call on New Delhi to make it “free for all” for a razor-sharp competition.
Low cost carriers (LCCs), profitable from the year-on-year growth of 20+% in the domestic market, are flying on regional routes with plans for long-haul to Europe and the United States and Far East. This is backed by 900+ planes ordered by airlines operating in India, and speaks well of the market.
Air India’s current growth on international routes is between 8-10%, and it will be below potential even at 12%.
Investors believe the Indian government will keep a strategic control in Air India which will make it an uncomfortable acquisiition for anyone. fii-news.com
