The Indian government has kicked off the process of inviting financial bids for the sale of centre-run airline Air India. According to sources, the sale of Air India will be concluded by September this year.

Let’s know why this decision was taken by the Indian Government.

The Air India airline has been running under huge losses since it merged with the Indian Airlines in the year 2007. Air India has reported the highest annual loss of Rs.8556.35 crores in the financial year of 2018-2019 and a loss of Rs.5300 crores in the financial year of 2017-2018.

In the last financial year, Air India has suffered a loss of around Rs.2570 crore only in the first quarter and around Rs.8000 crore in the entire year. Although the amount of loss had been lowered in the last financial year than in the previous one, the amount was still very huge. Hence, the Indian Government has taken this decision to sell off all the stakes of Air India on account of this loss and huge debt burden.

Financial bids were called for this purpose and the entire deal is expected to be completed by September.

Bids were shortlisted and the shortlisted entities have been given time to furnish their financial bids till the deal takes place. They will then have to get security clearances from the Home Minister. Only the bids of those investors who got security clearances from the Home Minister will be considered. The Air India is expected to be privatized by the month of September.

Last October, new norms were announced considering the concerns of the potential buyers. It allowed bids based on the enterprise value of the Air India airlines.  According to the new norms, the buyer will not have to pay for any predetermined amount of debt but will have to pay 15 percent of the enterprise value in cash. The divestment of the Air India airlines will privatize it completely.

The Tata Group is also one amongst the various multinational conglomerates putting financial bids in this case.

Due to the COVID-19 pandemic, most aviation companies incurred huge losses and Air India too suffered from losses. With the striking of the second wave of coronavirus, the Air India airlines has asked for financial assistance from the Indian Government as there has been a reduction in the carrying capacity from 80 percent to 60 percent.

The privatization of the Air India airlines may be a turnaround for it. Once the divestment of the Air India airlines is successfully completed, it is expected that passengers can get better facilities and amenities while flying.

Due to all the reasons and the massive losses suffered by Air India, the Indian Government has quite rightly decided to privatize the airways.

To the uninitiated, Air India is a government owned airline connecting several national and international destinations. It is the largest international airline of India. It started as a mail carrier and was founded by J. R. D Tata in 1932.  Initially, it was called the Tata Airlines.

Indian Government has long taken the decision to sell all its stakes in Air India, but the process got delayed due to the COVID-19 pandemic.