Govt to infuse Rs 1,200 cr equity in Air India

The government would infuse additional equity of Rs 1,200 crore (Rs 12 billion) into Air India over the next few months and review its performance to decide on the future course, Civil Aviation Minister Praful Patel has said.

He, however, said there was no decision to divest government equity in the cash-strapped national carrier "at the moment".

"It is imperative that we assess the situation after (a total of) Rs 2,000 crore (Rs 20 billion) is infused as equity. Rs 1,200 crore will be given in the next few months," Patel told PTI in an interview on the sidelines of the annual summit of the International Air Transport Association (IATA) in Berlin.

The government, as Air India's owner, last year gave the airline Rs 800 crore (Rs 8 billion) as equity. Asked whether government was mulling divesting its stake in the ailing carrier, he said "at the moment, the decision is not to disinvest and we stand by the policy of the government. The government's decision is to have a national carrier and it shall continue to be so."

On whether government would consider a "course correction" regarding the merger of Air India and erstwhile Indian Airlines following criticism from several quarters, Patel said "no, nothing of the sort.

We have to make sure that it works well. We have to see how it performs (after the equity infusion). There has been no government subsidy to Air India". He said officials of all airlines attending the IATA Summit have opined that "mergers do not happen overnight. It is an ongoing process which has to be achieved over time.

Air France-KLM have taken six years. Nobody has said merger is a one-day process." As costs increase and the airlines' margins came under pressure, consolidation was "inevitable and nothing unusual".

On Air India's financial troubles, he said there were several options before the government to help the airline come out of it -- to allow the airline to go to the market, to go for an IPO (Initial Public Offer) or give it equity support.

"In this case, government chose the third option". However, the Minister asserted "the worst is over for all (Indian) airlines, including Air India".

On strengthening of the Directorate General of Civil Aviation (DGCA), Patel said government was considering granting it full autonomy and support the regulator in its functioning.

"We need to institutionalise this total autonomy" the government would like to give it, the Minister said, when asked whether a legislation would be brought for the purpose in Parliament."