Rescue Operation in the Air: A Case of Air India

Abstract

Air India (AI), the public sector company, which had its beginning sixty five years ago, is involved in divestment process. It was beset with operational inefficiency and has been making losses for the last many years, with an accumulated loss of Rs. 46,256 crores between April 2010 to December 2017. To keep the airline in running condition, the government invested Rs. 26, 545 crores into the airline since April 2011. Finally, the government has decided to divest 76% stake in the company. A 100% stake is offered in its subsidiary Air India Express and a 50% stake on the branch which is handling ground operations. Its other subsidiaries-Alliance Air, Hotel Corporation of India, Air India Air Transport Services and Air India Engineering Services, are not offered for sale and would be transferred to a special purpose entity (SPV). Apart from financial re-structuring, focus has also shifted to organizational and managerial re-structuring too. For prospective buyers, the strengths of AI which could have attracted them to buy were its bilateral flying rights, lucrative international destinations, large fleet of wide bodied and narrow-bodied aircraft and a large customer base. However, these were offset by the huge debt burden and the large employee base. The government could not attract a single potential bidder for the company. The government was in a dilemma. It had to put on hold the divestment process. The future is bleak, whether the government will be able to revive the ailing airline remains to be seen. The objective of the case is to identify the reasons for divestment and the structure of divesting an enterprise. Also, to identify the financial, HR, operational and marketing implications of the process of divestment.