Air India’s long and difficult journey towards privatization
New Delhi: When Colin Marshall Marsh arrived in British Airways Plc (BA) in 1983, he saw an airline swollen with a demoralized team, flew to its bosses and flowed into its losses.
It was the beginning of the privatization in Britain of Margaret Thatcher. The sale of British Petroleum was under way, and British Telecom was privatized in 1984. John King, president of BA, hired Marshall as CEO and the memory was clear.
King fired some 22,000 BA workers, paving the way for Marshall. Over the next four years, Marshall has reviewed the airline, through its staff to customers, increase productivity, reduce costs and check for losses. In 1987, when it was privatized, BA obtained a profit of 284 million. It remains one of the crown jewels of the success of privatization.
Thirty years and the other side of the world, Air India, another very endeased state airline, with the support of the bailouts and responsible bureaucrats, awaits its Marshall Plan. After traveling thousands of rupees in the black hole of Air India, the government seems to have definitely taken their ideas. He does not want to run the airline.
For the flagship of India, this is the time for BA.
Twice the luck?
This will not be the first time. An attempt to privatize Air India which was made in 2001. It was then qu’Atal Vajpayee was prime minister. But a wave of privatizations in the 2000s failed to resolve the airline. Since then, Air India has undergone a disorderly merger with Indian Airlines, has accumulated debt and saw aggressive rivals emerge. Although there is political support for the sale of Air India now, there is skepticism about whether it would make economic sense for a buyer.
“I can see an ongoing political agreement, but the economic case has limited merit without restructuring and significant flexibility to an investor to radically transform the company,” said Vikram Krishnan, associate partner of Oliver Wyman, a consulting firm based in San Francisco, “it will be interesting to see if they can find an investor.”
In an interview issued on May 27 by the public network Doordarshan, Finance Minister Arun Jaitley said that Air India, with a market share of only 14%, had a debt of 50,000 CRS. “Now, there are private airlines that fly in. Indigo, GoAir, SpiceJet, Jet Airways, where no money is invested, but to direct Air India, they have invested millions of Rs.50,000 rupees this money is. And if 86% of flights can be managed by the private sector, they can also handle 100%, “said Jaitley, the clearest sign that The government wants Air India to withdraw.
Air India may have suitors, said an international investor who invests in airlines. Do not ask to be named.
“The reason investors could consider that it is because it is,” said the investor, noting that the airline had revenue-generating activities, aircraft, passengers and an established network.
His theory would be a) I am a brave investor; B) I would like to buy an existing source of income and I can see a path to profitability through the following 10 things to do (whatever they are); C) I love India and is a major player in the market, difficult to replicate its size and network, unless a considerable capital is deployed over time, “said this person.
To be sure, the massive infrastructure engineering of Air India and ground handling subsidiaries would make any airline envy.