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Questions over AI’s management rights

BusinessQuestions over AI’s management rights

Aviation experts have applauded the decision of the Government of India to allow 49% Foreign Direct Investment (FDI) for Air India recently, ahead of the proposed privatisation of the airline. However, they believe that it is only another step forward towards the disinvestment process of the already ailing airline.

Experts have also raised concerns over the decision not to give management rights to foreign investors willing to invest in Air India, as they believe that this decision is likely to affect the foreign investment process for the airline.

Harsh Vardhan, chairman of Starair Consulting, told The Sunday Guardian, “This policy decision of the government is nothing but an approval that paves the way for the disinvestment process of Air India. It is a decision that is likely to boost confidence among investors likely to invest in Air India during its process of disinvestment.” 

He further added that, what Air India is facing is a management crisis and if the government does not give management and operational rights, nobody will come to invest in an airline on the verge of collapse with thousands of crores of debt on its head.

Koustav Dhar, CEO and Director of Zoom Air, a low cost domestic carrier, also told The Sunday Guardian that without operational and some management rights to investors, it is unlikely to become a fruitful venture. “Air India is an ailing airline and the government has already pumped in a lot of money for its revival, but what needs to change for Air India for a turnaround is effective professional management of its technical and operational functions. But if these rights are not given, I do not see anything good happening,” Dhar said.

Earlier, all other private airlines in India were allowed to have FDI up to 49%, but Air India was kept out of this till 10 Janaury when the government, through a Cabinet decision, allowed 49% FDI for Air India. However, the government said that, “Substantial ownership and effective control of Air India shall continue to be vested in an Indian national.”

However, Jitender Bhargava, former Executive Director of Air India, believes that the government’s decision is right as this would bring in more international players, technology and competitiveness in the aviation market. “I do not see why foreign investors would hesitate to invest in an Indian international airline that has the broadest network across the world. Companies would have genuine interest in making investment in Air India and I am sure with newer technology and expertise, this airline will come back to its glory,” Bhargava said. 

He further added that even the Tatas and Singapore Airlines are working through a joint venture to operate Vistara.

Air India had a total debt of a little less than Rs 49,000 crore by the end of March 2017, which consists of over Rs 17,000 crore of aircraft loans and a little over Rs 31,500 crore of working capital loans. The government has also pumped in some Rs 23,000 crore in the past few years as bailout package for the airline, but little has improved.

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