Boost for Air India divestment: Foreign airlines can now own 49% in Maharaja

THE Cabinet on January 10 took a key decision by which it gave a much-needed boost to the government’s plan of divesting its stake in Air India by giving its approval to allow foreign airlines to own up to 49 percent of the loss-making national carrier. Foreign airlines were so far barred from owning any share in Air India, even though they were allowed to have up to 49 percent stake in other Indian airline companies. This restriction...
has now been removed.
The 49 percent cap on the holding of foreign airlines in Air India is a part of the total permissible limit of 49 percent on foreign investment in the carrier.
Now, any foreign player keen to pick up a stake in Air India will first have to take the approval of the government. However, this is a superficial clause since the government is the one selling the stake and it would be only too happy to sell a 49 percent stake to a foreign airline.
So far, foreign investment of up to 100 per cent is allowed in Indian airlines, with a ceiling of 49 percent on holding by foreign airlines. Foreign investors, including foreign airlines, do not need prior approval for holding up to 49 percent in an Indian carrier.
A group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon.
Air India is surviving on taxpayers' money.
Substantial ownership and effective control of Air India shall continue to be vested in an Indian national, a government release said. The divestment of the government’s stake could take another 3-6 months.
So far, Interglobe Aviation, which runs IndiGo Airlines, is the only airline company to have officially expressed intent to buy the national carrier.
According to one media report, expression of interest (EoI) for Air India disinvestment is likely to be issued by the government this month, possibly on January 25.
In July last year, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle nod for the strategic disinvestment of the airline.
Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds. The ten-year bailout package began from 2012.
Air India made a loss of Rs 4,310.65 crore in 2015-16, adding to its Rs 6,280.42 crore loss in the previous financial year. The airline, which is completely owned by the government, is weighed down by a debt of around Rs 52,000 crores.