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of
Air
India
Research
Objectives
The
study
intends
to
analyze
the
efficiency
gains
resulting
from
privatization
and
how
such
gains
can
affect
the
airlines
financial
situation.
Specifically,
the
study
will:
Review
the
trends
of
Air
Indias
debt
as
a
public
enterprise
and
hence
the
governments
debt
as
a
result
of
subsidizing
the
airline
Assess
the
current
performance
of
the
airline
in
terms
of
profitability,
capital
investment,
leverage
and
efficiency
in
resource
utilization
Assess
the
fiscal
effect
Hypothesis
H0:
Privatization
would
have
a
positive
effect
on
the
efficiency
of
the
airline,
leading
to
improved
performance,
reduction
in
government
subsidies,
and
a
better
financial
position
for
the
airline
H1:
Privatization
will
not
have
any
effect
on
the
efficiency
of
the
airline
or
the
financial
situation
Literature
Review
The
often-stated
objectives
of
privatization
run
in
general
terms,
such
as
developing
the
private
sector,
broadening
ownership,
reducing
the
fiscal
burden,
increasing
economic
efficiency,
reducing
the
administrative
burden,
developing
capital
markets,
assessing
capital
and
technological
markets
and
raising
revenue
for
the
government
(Oliver
and
Bhatia,
1998).
Concerning
the
performance
improvement
brought
by
privatization,
the
evidence
is
contradictory.
According
to
the
studies
by
Adams
(1992),
and
Megyery
and
Sader
(1997),
there
was
no
significant
difference
in
performance
between
privatized
and
non-privatized
firms.
However,
other
studies
(Oliver
and
Bhatia,
1998)
found
a
general
performance
improvement
post
privatization.
Some
even
argue
that
efficiency
improvement
can
be
misleading.
The
answer
lies
not
in
economic
efficiency
but
in
politics
and
the
politically
accommodating
behavior
of
governments.
According
to
Parker
(1993),
there
is
no
overwhelming
support
for
the
notion
that
private
enterprise
is
inevitably
superior
to
public
enterprise.
Many
a
times
performance
improvements
can
be
attributed
to
the
restructuring
within
the
organization.
The
general
conclusion
drawn
from
the
available
literature
is
mixed.
Through
one
may
argue
for
improved
performance
as
firms
change
ownerships,
the
question
that
begs
evidence
is
whether
improvement
is
due
to
the
change
of
ownership
or
the
nature
of
the
new
ownership
i.e.,
private.