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Divestment of Air India (Relevant for GS Prelims and GS Mains Paper III)

The Union Cabinet gave its ‘in-principle’ nod to divest stakes in Air India — a wholly owned government airline. The Cabinet decided to go for Air India’s strategic disinvestment, which means the government is willing to shed a substantial portion of its stake and hand over the management of the ailing airline to the private sector.

The Cabinet also approved strategic disinvestment in five of Air India’s subsidiaries — its Maintenance, Repair and overhauling unit (MRO unit) Air India Engineering Services (AIESL), ground handling arm Air India Transport Services, Air India Charters which operates Air India Express and Airline Allied Services which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels).

Background
NITI Aayog’s recommendation on strategic disinvestment of Central public sector units, including Air India, was the immediate trigger for its stake sale. In its report earlier this year, the NITI Aayog recommended an outright sale of Air India.

Reasons behind disinvestment of Air India
1. Air India has not registered profit since over a decade after the merger of the erstwhile Indian Airlines (domestic operations) with Air India (international operations) in 2007.

2. The primary reason for Air India’s disinvestment was the government’s inability to cope with its debt of Rs. 52,000 crore. Around Rs. 22,000 crore of the total debt accounts for aircraft acquisition loan and the rest is related to debt for meeting its daily and operational expenses.

3. Air India’s market share has also eroded rapidly over the years due to competition from private players — from 19.4% in 2013 to around 13.3% in May 2017 — in the domestic sector, which made it unattractive to continue running its operations.

(Adapted from The Hindu)



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