The document discusses whether privatization of Air India is a good idea. It provides background on Air India's history since its founding in 1932 and reasons for its downfall, including poor management, political interference, unplanned merger, and accumulating $7.8 billion in debt by 2016-2017. The document argues that privatization could improve operational efficiency, send a message about unprofitable public sector units, and increase competition in the aviation industry. Potential bidders for Air India like Indigo and Tata Group are mentioned. In conclusion, the document states that privatization is necessary to clear Air India's debt burden and allow it to function properly, even if it may be a bitter solution.

1. Maharaja of
Misfortunes
Is privatization of Air India a good idea?
PRESENTED BY: SHREYA SINGH, IIMC NEW DELHI

2. History of the Company
1932: Founded
by JRD Tata and
called Tata Air
service
1953: Indian
government
acquired major
stakes.
1960: Purchased
first Boeing
707-420 and
entered jet age.
2001: Was set for
disinvestment, but
it failed due to
global slowdown.
2014: Became the
27th member of
Star alliance on
11th July.
1994: The airline
was registered as
Air India Ltd.
2011: Air India and
Indian Airlines merged
along with their
subsidiaries to form Air
India Limited.
2017: Air India at
the verge of being
privatized.

3. Reasons for the Downfall of Air India
❏ Poor management, labour dispute and political interference are
one of the major reasons for the downfall of Air India.
❏ Financial mess faced by the company consistently for two years.
It lost US$1 billion in FY 2008-2009 and US$ 1.5 in FY 2009-2010.
❏ Unplanned merger with India Airlines in 2007.The two airlines
posted a combined loss of (US$ 1.0 billion) in 2009.

4. Reason for the Downfall of Air India
❏ The Top Bosses of Air India not having decision power as there
will be ministry interventions which leads to lake of
cohesiveness, focused, proactive and long term business
planning.
❏ Air India racked up $7.8 billion USD in debt and an operating
loss of $4 billion USD.
❏ The loss started in 2007 continued to rise with each passing
year. In 2016-2017, the company reported a loss of Rs. 3,643
crore.

5. The solution:
Privatization
of Air India
A privatized Air India
could not possibly be
worse and likely will be
much better
BECAUSE

6. Pros of Privatization
Operational efficiency: Privatisation will infuse technology, capital, and
private sectors management practices in system.
Pro reform signals: The disinvestment will send a strong message to other
loss making PSUs that the government is no longer ready to invest their good
money after bad.
Opportunity cost: In the case of air india, the cost is lot higher as it is
consistently making losses and is dependent on the government for survival.
Boom in aviation industry: Privatisation will increase competition in the
aviation market, which in turn will improve the quality of services in air india

7. Who can bid for acquisition of Air India?
● The one who has at least 5 years of experience in providing similar
advisory services for disinvestment, strategic sale, merger and acquisition
activities, private equity transaction etc.
● Should have advised, handled or successfully completed at least one
transition of merger, takeover, strategic disinvestment, private equity
transition of the size of Rs. 4,000 crore or more.

8. Prospective bidders for Air India
Bird Group: Interested only in only in the ground handling business of Air
India.
Turkey's Celebi: Shown interest in buying state-owned Air India’s ground
handling operations.
Indigo: Wrote letter to the Government Of India showing the its interest only
in the International operations of Air India.
Tata Group- No formal proposal has been made to the government for the
acquisition of Air India. Although Natarajan Chandrasekran, Executive
Chairman of Tata Sons said that the Company is considering to buy Air India.

9. Our take on the issueClear the balance sheet: The airline will never be able to function properly
if it continues to be laden with old debts and interest burden.
No involvement of Government: The government should exit Air India
completely.
The best owner for Air India: Tatas would the best fit for Air India. It
would be an emotional match.
Special Business Units, including MRO (Air India Engineering), catering
(TajSATS), ground handling (both Air India Air Transport Services and
AISATS) and Centaur Hotels, should be sold off separately to raise capital that
can be used to retire debt.

10. Privatization could be bitter, but it is a life saving
drug for Air India...
THANK YOU….