The Union Government has invited bids for 100% stake sale in Air India and the transfer of management control to the private sector. This is the second attempt in the past two years by the Govt for disinvestment in the National Carrier. 

Limitations of the previous deal:

  • Only 76% of Govt’s stake was up for sale.
  • No transfer of Management Control to the buyer.
  • The heavy debt burden of Rs 60000 crore was to be borne by the prospective buyers( the Govt was willing to hive off debt worth Rs 29000 crore only). 

Key terms in the new deal

  • the Government is selling its entire 100% stake in Air India and in low-cost airline Air India Express and its entire 50 %  shareholding in the Joint Venture AISATS (rest 50% is with Singapore Airlines)
  • The debt liability for the prospective buyer has also been significantly reduced. The debt to be borne by the buyer will be Rs 23286 crore while the Govt will bear a debt of Rs 36674 crore
  • Entire management control will also be transferred to the successful bidder. 
  • A Special Purpose Vehicle (SPV), Air India Asset Holding Ltd, will be created to take over the remaining liabilities worth Rs 56334 crore and certain assets. 
  • The net worth criteria for bidding have also been kept low at Rs 3500 crore.
  • The buyer has to retain the existing employees for a certain lock-in period. 


  • Founded in 1932 as Tata Airlines, it commenced operations as a public limited company under the name ‘Air India’ in 1946
  • Currently, it has a market share of 12 % domestic and international passenger traffic.
  • It has a fleet size of 146 operational aircraft and assets worth over Rs 52000 crore. 


  •  The buyer will get a fleet of 146 aircraft, 56 % of which are owned by Air India while the rest are on lease.
  • They will also benefit from as much as 50 % of the International market share held by Indian airlines and also by 4400 airport slots that the airline holds in the domestic aviation market and 3300 slots in the international market. 
  • The networking capital is zero, which means that the Maharaja’s current assets are equal to its current liabilities. This means the buyer will effectively inherit zero liabilities. 
  • The buyer will also get the expertise of its staff including pilots and cabin crew with deep technical and operational knowledge, along with the airline’s brand as well as the famous “Maharaja” and “Flying swan” logos.
  • The transfer of Air India into private hands may translate into better efficiency and sound management. The ensuing market forces may provide cheaper travel for the passengers. 


  • The Govt’s move towards privatization, if successful, would mean taxpayer’s money will no longer be used to keep Air India afloat, despite making losses on a monumental scale. The Govt can channelize these funds on its social development agenda.
  • This is being touted as the single biggest write-off by the Government, signaling a bold reform and firm determination towards privatization and economic efficiency. 
  • Any private or public limited company, a corporate body and a fund with a net value of Rs 3,500 crore will be eligible to bid. This means many potential buyers. 
  • The Govt has stuck to its FDI policy of allowing a foreign Airline to buy only up to 49% stake in Air India. Thus, substantial ownership and control will still remain with an Indian company

Way Forward:

  • The recent push for privatization is a welcome sign but the Government must ensure that it does not end up undervaluing Air India in a haste to sell it off,  as happened in the case of VSNL’s sale to Tata. 
  • The Govt shall also be cautious about the fate of 9617 employees of Air India. The Agreement shall ensure the welfare of these employees in addition to providing for them certain social security cover. 
  • The Govt’s liability worth Rs 56334 crore & certain assets will be parked with an Asset Holding Company, Air India Assets Holding Ltd. The SPV must be managed prudently so as to ensure the least further losses to the Government. 
  • The Government shall also have a definite disinvestment framework which shall be announced at the beginning of the financial year. Currently, the Govt only announces its annual disinvestment targets and skips the modalities and targeted PSUs which will be up for grabs. 

Also readHow Air India Sale Can Spur Govt’s Divestment Agenda

Air India Disinvestment