Air India sale gives Narendra Modi reform miles

If anyone can restore the Maharaja back to its former glory, it’s the Tatas

  
Image used for illustrative purpose. An Air India Airbus A320neo plane takes off in Colomiers near Toulouse, France, December 13, 2017. Image for illustrative purposes.

Image used for illustrative purpose. An Air India Airbus A320neo plane takes off in Colomiers near Toulouse, France, December 13, 2017. Image for illustrative purposes.

REUTERS/Regis Duvignau

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

MUMBAI - Air India’s sale points to bluer skies in New Delhi. Prime Minister Narendra Modi’s government is selling the indebted national carrier back to the Tatas, the storied family conglomerate that lost control of it to nationalisation nearly seven decades ago. Even though the proceeds being raised are minimal, the privatisation is a welcome symbol of a cautious new embrace of private markets.

The airline had become a globetrotting ambassador of the country’s inefficiencies, burning cash as it taxied up to 1,800 international landing and parking slots at major airports around the world. Air India has a loyal band of fliers who value the carrier’s full service and roomy seats despite its poor punctuality and last-minute flight cancellations. Improvements in such areas should be relatively easy for the new owner.

If anyone can restore the Maharaja back to its former glory, it’s the Tatas. The group has experience running consumer businesses, including British marques Jaguar Land Rover and the luxury Taj hotels chain. Tata probably will merge Air India with other existing stakes in two smaller carriers: AirAsia India and Vistara, a 51%-owned joint venture with Singapore Airlines. Uniting the trio while successfully taking on unions will be a stretch, however. And government officials may continue to meddle as if Air India is state-owned, impeding efforts to improve efficiency.

New Delhi is collecting barely $400 million of the $2.4 billion enterprise value ascribed to the carrier. With one difficult deal done, though, Modi is more likely to follow through on others that could raise substantially more. Officials have promised to privatise two state lenders, and work on that is underway, for example. The biggest prize is Life Insurance Corp of India. The government has hired advisers to sell shares worth $14 billion in a blockbuster initial public offering.

As recently as five years ago, many of these deals were unthinkable. Modi showed little public willingness to sell controlling stakes in failing companies. Offloading Air India took time and had several false starts, but the mere fact it has been finally agreed gives the government a good amount of reform miles.

CONTEXT NEWS

- India on Oct. 8 approved the sale of Air India and two subsidiaries to the Tata conglomerate for an enterprise value of 180 billion rupees ($2.4 billion).

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Jeffrey Goldfarb and Katrina Hamlin) ((For previous columns by the author, Reuters customers can click on GALANI/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | una.galani@thomsonreuters.com; Reuters Messaging: una.galani.thomsonreuters.com@reuters.net))


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