Even as Air India sale fails, check what tiny Cyprus just did

The Government of India's efforts to sell off cash-strapped Air India has not seen any success so far. Air India has been eating massive amounts of tax-payers' money and even then running into losses. Air India has even been failing to meet its working capital requirement and looking for loans to fix the problem. Two days ago, Air India got a Rs 1000 crore loan from the National Small Savings Fund. It also received Rs 980 crore towards equity infusion by way of a supplementary grant from the Union government. The possibility of getting these amounts back is negligible indeed. So, keeping Air India in mind, what is happening in tiny Cyprus, really puts things in perspective about what is possible.

Notably, Air India further hopes to mop up Rs 500 crore through short-term borrowings next week. These are, however, stop-gap arrangements with no permanent cure of ailing airline in sight. Also, the government is apparently unable to decide on the right course of action. The reason could be political as well. In contrast to India, a foreign country with a similar problem shows how a teething problem like Air India may be solved. 

In Cyprus, the government has withdrawn the licence of its ailing airline - Cobalt. The government turned down appeals from Cobalt for more time to find investors as it withdrew the carrier's operating licence. "We wanted more time, but our licence was revoked," Cobalt's chairman Grigoris Diakos told state radio, a day after the carrier's sudden collapse, on Friday. "We asked for a suspension (of the licence), we needed two months to find a strategic investor after the Chinese investor pulled out," he added.

Diakos said there were "one or two serious proposals" from potential investors. But the Cyprus Air Transport Licensing Authority (ATLA) decided to revoke the licence, senior transport ministry official Alecos Michaelides said.  The Cyprus government also ruled out a temporary suspension because there was no sign of a solid rescue plan. "A company that is constantly posting losses, and especially losses of around 30 million (euros, or USD 34 million) a year over a three-year period, cannot survive," Michaelides told ANT1 television.

Michaelides further said that the strategic Chinese investors were estimated to have ploughed in USD 114 million, but losses had continued unabated. Although the airline's licence has been revoked, it can reapply to resume operations once it finds the necessary financing, the government said, although it could also face legal action.

On Wednesday night, Cobalt Air ceased all operations and entered an administration process, after completing just two years and three months of operations. Transport Minister Vassiliki Anastassiadou said USD 2.3 million have been allocated for the repatriation of thousands of passengers left stranded by Cobalt's collapse.

Cobalt was launched in 2016 in a bid to fill the void to become the Mediterranean island's biggest airline after state-owned Cyprus Airways went bankrupt in January 2015. Cobalt operated 13-15 flights daily, carrying up to 3,000 passengers to 23 destinations including Athens, Beirut, Heathrow, Paris and Tel Aviv. It had plans to launch flights to China.

Cobalt's largest shareholder was AJ Cyprus, with 49 percent of the shares. AJ Cyprus is owned by China's AVIC Joy Air.