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Air India may not attract bid in current form: Ashok Gajapathi Raju

An alternative mechanism has been formed to guide on Air India privatisation and consultants are working out the details of the bidding process, says Ashok Gajapathi Raju.

, ET Bureau|
Feb 18, 2018, 10.55 PM IST
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Air India may not attract bid in current form’: Ashok Gajapathi Raju
There is no ad hoc allocation of bilateral flying rights, civil aviation minister Ashok Gajapathi Raju.
Air India is a good airline but its finances are bad, making it unattractive to bidders in its current form, says union civil aviation minister Ashok Gajapathi Raju. The government is working on various options and expects to complete divestment of the flag carrier by the end of 2018, Raju tells ET. Edited excerpts:

You have said Air India’s debt is much more than predicted. Can you explain?
The airline has debt and dues to be paid to vendors. The airline owes money to (vendors) like oil marketing companies, the Airports Authority of India (AAI) and many more. Now, when you add the dues with debt, total liabilities would be much more. Fact is that the finances of Air India are bad. It is a good airline otherwise. In this existing form, it is highly unlikely that anyone will pick it up. If you try and bid out Air India in the same way as it is today … I do not think it will make economic proposition for anyone. I also do not think that it will attract anyone as it is, to my mind, as it is in a debt trap. You have to make it fairly attractive, workable before you put it out for bids. An alternative mechanism has been formed to guide on Air India privatisation and consultants are working out the details of the bid (process).

What issues has the alternative mechanism finalised?
Broadly, the debt and non-aviation assets will move into a separate company and Air India will be sold with aviationrelated assets. There are a lot of suggestions on amount of debt to be shifted and the number of companies to be bid out together, but the final decision will come soon. We expect to complete privatisation by (end of) this year.

How will you rate the budget from an aviation perspective? How would AAI invest its outlay?
First time, we are getting so much attention in the Budget. Anyway, aviation coming for the right reasons in the Budget is a positive. On the AAI bit, the company will have to leverage institutional finance to fund the airport project. It has a programme. Also, you cannot confine investments in the airport sector only to AAI. A lot of private sector investment will also come in the sector.

You represent a party (TDP) whose leader has complained of Andhra Pradesh being ignored in this year’s budget. What are the concerns?
It is a very sensitive problem. There is a general feeling in the state that the government of India divided the state and it should take care of it now... Once the government funding is put in place, these things would become visible... there would not be anything (to show without funding). Local leaders will talk about it. I am in a situation where I am in the central government as a minister and also a member of the Telugu Desam Party.

Is breaking alliance with BJP also an option?
That is for my party leaders to decide.

Do recurring issues with P&W aircraft engines concern you?
It is and should be a concern for the regulator. There was a problem with the engine sometime back and the regulator mandated a certain type of solution. India’s safety record has been good and we intend to keep it that way.

All options — even grounding — are available and the DGCA (Directorate General of Civil Aviation) has also grounded three aircraft of IndiGo. Plus, they have also said that aircraft with one defective engine cannot operate long-haul flights (beyond two hours of flight time). But the regulator of the country that has manufactured that engine, (European regulator EASA) has to issue any condition that is required, and others (like DGCA) will follow.

While bilateral flying rights created controversy in the earlier government, this government has totally banned them. Why?
We have evolved formulae to ensure that there is a system in place and there is no ad hocism in allocation of bilateral flying rights. First is to start negotiation only if 80% of the existing quota has been exhausted by both sides. If one side has achieved its 80% but the other side has not started anything, there also is a formula. But there are also conditions beyond aviation, where needs of the country take a front seat and where we can decide on an increase in bilateral rights beyond the formula. In these cases, the cabinet secretary will decide on the increase, if any, that has to be agreed upon.

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