LONDON — The Indian Government has shut down the potential sale of the national carrier, Air India, and instead provide emergency funding to help the airline improve its operational efficiency and try to reach profitability.
The attempted sale of the 76% stake in Air India failed to attract any bidders due to the airline’s current financial situation.
“The airline is posting operational profits. None of the flights goes empty. With all the cost-efficient mechanism in place, we will continue improving its operational efficiency. There is no need to rush in for disinvestment as of now,” published the airline in a statement.
New Indian Fund Injection
The Indian government stated that the carrier will obtain the funds from the government for its day-to-day operations and will even place orders for “a couple of aircraft.”
Air India currently has $7.5 billion worth of consolidated debt.
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Finance Minister Arun Jaitley took the decision to put off the sale and is now looking to turn the carrier around to a profit before they put stake back on the market.
“Certain conditions have to be met before listing a company. Once Air India fulfills those, we will go in for an initial public offering and subsequent listing,” the official said.
Improving Efficiency, Striving For Profitability
Jaitley concluded that the airline’s main goal is to improve operational efficiency. “We will continue to boost employee morale, starting from the top level, to better the functioning of the airline. Funds would be provided as and when required,” he said.
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The Securities and Exchange Board of India states that the norms of Indian law dictate that a company has to post a profit in their previous three financial years before it can list itself in the stock exchanges.
The Indian government will have to hold on to the carrier until they make a consistent profit for three years in a row before making any further moves.