Government of India splits the iconic Air India into 4 parts ahead of sale

The iconic Air India is in hot water since sometime but Government of India finally takes the call to split it into 4 parts ahead of a sale offer. Here’s what you should know.

Government of India is breaking up iconic aviation force, Air India into four separate companies and has plans to put up for sale at least 51 percent in each of them. This is a part of the strategic plan for dealing with the debt ridden Air India through disinvestment by Prime Minister Narendra Modi. Air India and Air India Express, are going to be treated as one company, and the entire process is set to be completed by the end of 2018. Its regional arm, ground handling, and engineering operations will also be sold separately in the same process.

Air India has been in hot water since sometime and is being bailed out by the Government. This has strained finances and that is why the sale is being considered. The net assets are Air India with a debt of $7.9 billion, five subsidiaries and a joint venture, and a workforce of 27,000. So who are the buyers?

Foreign investment can own upto 49% of Air India and management control will be local. Interested investors have been invited. The country will have to ensure the aviation sector keeps pace with spike in demands. To handle this investments of as much as 4 trillion rupees are required to expand and build new airports over the next decade, which will see contribution from the private sector.

As per leading daily – “Carriers in India, including market leader IndiGo, are set to order more than 1,000 planes as they look to tap an emerging middle class with disposable income to fly for the first time according to Sydney-based CAPA Centre for Aviation. However, capacity constraints at the main airports in New Delhi and Mumbai mean there are hardly any landing and parking slots available. The government is in the process of implementing new airports in these two cities and, in the short-term, improving infrastructure at nearby airports to handle some of that growth.”

Whatever said and done, the closure of the iconic venture is a severe jolt and while it is a practical plan it is also a sad turn around of events.