I cannot imagine the GoI wants to keep burning a billion USD+ per year...
That is a false statement, unless you have evidence to support it. Had GoI given just ONE Billion USD in 2009 per CAG recommendation, GoI wouldn't have wasted $3.3B AI wouldn't have accrued $8.1B debt.
2011-12 - 1200 cr
2012-13 - 4000 cr
2013-14 - 5000 cr
2014-15 - 5500 cr (highest AI ever received in a year)
2015-16 - 2500 cr
2016-17 - 1800 cr
2017-18 - 650 cr
Again, debt guarantees are the same as subsidies. The GoI is on the hook for that debt.
Or are you stating that AI is no longer receiving debt guarantees they were receiving? If that has stopped, I can retract my statement. Otherwise, every penny of AI debt is in reality GoI debt effecting GoI bond ratings. Where India is in the development curve, the government should be borrowing for infrastructure (which I include education as well as water, medical, power, roads/rail, and airports).
If AI loses money, the GoI has to constrain spending elsewhere. There is a reason there is concern at the current losses by Air India.
This wouldn't matter if India bonds were selling well. Nope: https://in.reuters.com/article/india-bo ... NKBN1I51AA
Did I read that correctly that the GoI is borrowing at 7.5%? There is no way, due to the guarantees, to break apart the GoI issues from AI and vice versa.
So until the debt guarantee is terminated, I stand by every bit of debt AI takes on is a subsidy, even if not payed in the year of the loss.
The reality is none of India's government owned enterprises are adapting as they should be. Cest la vie.
For the sake of the GoI bond rating, Air India must be sold. Some debt must get off the government books or the spiral will get worse.
Project forward AI's loses when Indigo has the A321NEO and widebodies, Spicejet starts expanding again with the MAX, and GoAir isn't constrained by Pratt engine issues. Next year (as in calendar 2019) will probably be the most brutally competitive year yet for Indian Airlines. If AI had been sold, I could believe it would adapt at a reasonable rate. Now what?
I'm an analyst (fluids and aircraft), so I model everything. I model the Indian aviation market... as a hobby. To meet the growth that will happen over the next 19 months, RASK in India *must* drop. But since aviation is a very elastic market, the quantity of fliers will increase substantially with a drop in RASK. By my calculations, about 13% more growth for a 0.1 drop (Rupees per seat kilometer). India needs the drop in RASK to help national economic growth. So today's RASK is 3.4 with Indigo having a CASK of 3.3. The NEO cuts fuel burn 15%, or CASK by 5% (ish) to 3.15. The A321NEO cuts that further. Indigo claims 15%, I model more like 12%... But even a 12% drop gets CASK down to 2.78. So Indigo can push CASK down (assuming they either rotate out CEOs or increase seats to 186) and still make good money. What will AI do?
No government owned entity evolves as fast as private industry. Indian aviation over the next 19 months will change more than it did over the past 3 years, perhaps as much as past 4 years. Interesting times as the old Chinese curse goes...
So will AI be split into manageable chunks as bidders requested? Every other Indian airline that I'm aware of is only carrying aircraft debt (foreign lower interest rates vs. Indian rates). Has the debt on AI aircraft been paid down fast enough to bring them near their market value, or is there hidden debt there too (It is cheaper than borrowing from Indian banks). https://qz.com/1247394/air-india-sale-w ... t-10-days/
Unfortunately, the 1st sale attempt will always generate the highest bids. I haven't seen AI's numbers on RASK dropping 0.12 in a year and fuel up 30% which boosted CASK by about 0.3.
So we started with AI having a CASK of 4.7 with a RASK of 4.0 (see earlier links) and 6E having a RASK dropping from 3.4 to 3.3. 6E's CASK grew due to currency losses and that fuel. What did AI's RASK drop to? What is their RASK. Did they evolve fast enough to get domestic (say Air India express) CASK below 6E? Air India is in a price war with Indigo. Notice from the below link that AI express is competing by discounting to Indigo! (Indigo has better reliability and higher customer satisfaction that boosts RASK vs. the competition). In other words, Air India is in a price war for its very survival versus a profitable competitor with incredible cash reserves (13+ crore rupees) who can be dismissive of poor lease term offerings (Indigo is selectively buying outright aircraft, including all ATRs if they are unable to secure great lease terms). https://www.ndtv.com/india-news/indigo- ... es-1858257
The GoI is going to have a HUGE amount of debt they must acquire. Much more than if they had sold AI in chunks under more reasonable terms. When is too much too much?
It is so ironic reading through posts from 6 months to a year ago on the Air India divestment. We'll just say I was too much of an optimist on multiple fronts.
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.