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SIA bid for loss making Air India 19 years ago but pulled out due to hostile response in India

by Correspondent
29/11/2020
in Current Affairs
Reading Time: 2 mins read
39

It was earlier reported that SIA is currently in talks with its Indian partner Tata Group to jointly bid for the loss making Air India (‘After DBS “rescues” Chennai bank, SIA now in talks with Tata to “save” Air India‘, 28 Nov).

The bid, if it proceeds, is expected to go through Vistara, the joint venture airline between Tata Group and SIA.

Air India has been incurring losses for quite some time now. In its latest quarterly report, Air India incurred a net loss of about Rs2,570 crore (S$465 million) in the first quarter of 2020-21 as compared to a net loss of Rs785 crore (S$142 million) in the corresponding period a year ago.

“Air India Limited has been suffering continuous losses. The COVID-19 pandemic along with its related impact on aviation industry has further worsened the financial position of the company,” Indian Civil Aviation Minister Hardeep Singh Puri admitted.

Currently, Air India is sitting on a debt of Rs58,000 crore (S$10.5 billion). An airline analyst commented, “The acquisition of Air India by Vistara could result in a substantial outlay of funds and assumption of risk by the shareholders of Vistara. SIA and Temasek would have to evaluate whether they are willing to make an investment and assume risk of such high magnitude, especially in times when there is a huge slump in the civil aviation space.”

SIA attempts to bid for Air India 19 years ago

This is not the first time SIA is trying to bid for Air India. In fact, 19 years ago in 2001, SIA tried once. It was forced to pull out later.

In explaining its decision at the time, SIA said it was “surprised by the intensity of opposition to the privatization of Air India from various quarters, including certain sections of political groups, trade unions and of the media.”

“In such an adverse climate, SIA is not confident that it can play a useful and effective role,” it added. SIA also cited the slowing global economy as an additional reason for pulling out of the bid.

Then, SIA was seeking a 40 percent stake in Air India also with the Tata Group. India had hoped that the sale would help Air India cut costs, improve efficiency and return to profit.

In the financial year of 2001, Air India lost Rs520 million (US$11 million) which was 37 percent more than the loss it incurred the year before.

In other words, 19 years ago, Air India was already losing money.

It’s not known if the new SIA bid for Air India together with Tata again this time, if it goes through, will result in the same kind of hostile response from Indian “political groups”, “trade unions” and the “media” like what SIA experienced in 2001.

 

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