There is no immediate prospect of disinvestment of Air India, at least for now, as the Government said it received no bids for the airline till the last day on Thursday.
“No response has been received for the Expression of Interest (EoI) floated for the strategic disinvestment of Air India. Further course of action will be decided appropriately,” the Ministry of Civil Aviation tweeted.
The no-show underlines the challenge the Modi Government faces in fixing the debt-laden State carrier.
“The interest would not be there unless the Government decides to sell 100 per cent in Air India. Forget 24 per cent, investors would not find it comfortable even with the Government retaining 1 per cent stake in the airline post divestment,” an airline official told The Pioneer on condition of anonymity.
In a hope to find some takers, the Government eased some terms and extended the period to make bids this month only, but to no avail.
Major Indian airliners IndiGo Airlines and Jet Airways, which had initially shown interest, opted out of the race for Air India after the initial terms were disclosed. They have not made any comments since the clarification was issued by the Government earlier this month.
However, sources privy to the development said, “Steel-to-autos conglomerate Tata Group, which is widely seen as a potential suitor for Air India, is also unlikely to consider a bid as the terms were too onerous.”
Tata already operates two airlines in India, including Vistara with Singapore Airlines.
Singapore Airlines in the past said it was keeping an “open mind” about Air India, but sources close to the company played down the carrier’s interest.
As Ernst & Young (EY) had been working as the transaction adviser for the process, selling the State-owned carrier is key to Modi’s plans to divest assets and help keep the fiscal deficit at 3.3 per cent of GDP, a goal already under pressure from giveaways to farmers and other welfare benefits.
The Modi Government has proposed to offload 76 per cent equity share of the national carrier as well as transfer the management control to private players, as per the preliminary information memorandum. The transaction would involve Air India, its low cost arm Air India Express and Air India SATS Airport Services Pvt ltd. The latter is an equal joint venture between the national carrier and Singapore-based SATS ltd.
Earlier this month, the Government had extended the EoI submission deadline to May 31 from the previous date of May 14. The qualified interested bidders were to be intimated on June 15. As per the earlier schedule, the details of qualified interested bidders would have been known on May 28.
The Government would retain 24 per cent stake in the national carrier, the winning bidder would be required to stay invested in the airline for at least three years, as per the memorandum, issued on March 28. The ailing airline’s total debt stood at over Rs 48,000 crore at the end of March 2017.
While the Government has not set any minimum price, the sale could fetch between Rs 80 billion and Rs 100 billion rupees ($1.2 billion to $1.5 billion), banking sources told Reuters. Air India, known for its Maharaja mascot, has some of India’s most lucrative international and domestic landing and parking slots that are keys for the airline.
While the buyer would have management control and gain access to more than 2,500 international slots and over 3,700 domestic slots, it would also need to take on Air India’s 27,000 employees, 40 per cent of whom are permanent staff.
The terms also stipulate that the Government would continue to hold a 24 per cent stake, and the winning bidder would need to abide by conditions, not yet detailed designed to safeguard employee interests.