India’s cabinet approved Wednesday plans to sell a stake in state-run Air India as the debt-saddled carrier struggles to compete with low-cost rivals in one of the world’s fastest-growing airline markets.
“A civil aviation ministry proposal was received by the cabinet which was given an in principle approval for the disinvestment of Air India,” finance minister Arun Jaitley said after the meeting.
A separate group headed by Jaitley will decide how to move forward with the sale, including the amount of divestment and other matters related to Air India’s assets, debts and related hotel companies.
Once the country’s monopoly airline, Air India slowly lost market share to new private players, especially low-cost carriers.
Hit by delayed and cancelled flights and a generally poor service record, the flagship carrier began running losses as passengers flocked to a suite of new competitors offering cheaper and more reliable routes.
In January, Air India held a 12.8-percent market share — third after SpiceJet and market leader IndiGo, which dominates with 400 planes and a 42-percent market share.
Air India received a $5.8 billion bailout package from the government in 2012, and ran losses for nearly a decade until posting a profit last year.
Proposals to privatise the airline have been floated in the past but stalled.
The group tasked with progressing the sale must consider Air India’s “unsustainable debt”, the sell-off of three profit-making subsidiaries and potential bidders, cabinet said in a statement.
Unions representing Air India’s employees have been the fiercest opponents to the sale, with one demanding the government waive debts instead of offloading the airline to a private buyer.
The government had ordered the loss-making airline to turn around its fortunes, prompting the carrier to slash employee overtime and other expenses.
Experts say India’s aviation sector holds vast untapped potential, with just 100 million of its 1.2 billion people taking to the skies last year.
Low-cost airlines are rushing to expand their fleets to take advantage of that growth, encouraged by a fall in fuel prices that last year pushed several private operators into profit for the first time.
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