Now that no buyers have turned up for Air India, the next course of action should be for the state to make it clear that it would not invest any more money in the airline. If it can continue to service its debt, it can stay afloat. If it defaults on debt, the creditors can initiate bankruptcy proceedings under the Insolvency and Bankruptcy Code. If the resolution professional who takes charge of the airline can find a buyer for the airline as a going concern, that would be most welcome. But if it is unable to, it should then be liquidated and its individual assets sold to the highest bidder. Apart from a fleet of planes, Air India has real estate, bilateral rights to fly to and from foreign countries, coveted landing slots at airports around the world and in India, a skilled engineering wing and its Maharajah mascot that commands high recall.
It is possible that the government’s condition of keeping a 24% stake in the company has deterred potential investors. Who would want a government nominee on the board, who would be under political compulsion to vote against measures that the unions would label anti-labour? The government could make another attempt at divestment, dropping this condition. Or it could simply turn the tap off on fresh infusion of funds, forcing either a turnaround on the part of its airline or its bankruptcy, leading to sale as a going concern or liquidation. Sale under bankruptcy would carry no condition such as a mandatory residual stake for the government, and that could make Air India an object of desire. In either case, it would be a burden off the government’s back and send a clear message to other ailing public enterprises: shape up or prepare for the tender mercies of the Insolvency and Bankruptcy Code.
The people of India need competently run airlines to meet their aviation needs, not necessarily a state-owned carrier. Using Budget subventions to prop up an inefficient airline is iniquitous in a country where state funding of healthcare is just about 1% of GDP and fiscal discipline is a concern in a volatile global economy. Aviation is a great commercial opportunity in India, not a sink for subsidy. Private enterprise can lead the way in the sky.
Source: Economic Times, June 1, 2018