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Air India receives bids from suitors
The Union finance ministry has received multiple bids for Air India and the process for the loss-making state-run airline’s disinvestment now “moves to the concluding stage”, a government official said on Wednesday
The Union finance ministry has received multiple bids for Air India and the process for the loss-making state-run airline’s disinvestment now “moves to the concluding stage”, a government official said on Wednesday.
The announcement was made in a tweet by Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (Dipam), although he did not disclose who or how many bidders expressed interest.
Tata Sons later announced it had submitted bids and other people aware of the matter separately identified SpiceJet promoter Ajay Singh as one of the other bidders. Singh did not respond to requests for a comment.
“Financial bids for Air India disinvestment received by Transaction Adviser,” said Pandey in a tweet.
“Process now moves to concluding stage,” he said.
The financial bids will be evaluated against an undisclosed reserve price and the bid offering the highest price above that benchmark will be accepted. The bid will be initially examined by the transaction advisor before the recommendation is sent to the Cabinet for approval.
If Tatas emerge successful, this will mark the return of Air India to the Tata fold after 67 years. The Tata Group founded Air India as Tata Airlines in October 1932. The government nationalised the airline in 1953.
The Union government has renewed a push to sell its entire interest in the loss-making airline, which has been kept aloft by a bailout since 2012.
The government is seeking to sell 100% of its stake in the state-owned national airline, including Air India’s 100% shareholding in AI Express Ltd and 50% in Air India SATS Airport Services Private Ltd.
As per the Air India expression of interest floated by Dipam in January 2020, the airline has a total debt of ₹60,074 crore as of March 31. The bid has boosted prospects for the sale after the government sweetened the deal by allowing suitors to decide how much of the carrier’s debt they want to take on. The rest will be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle.
Despite the mounting debt and losses, Air India has some lucrative assets, including valued slots at London’s Heathrow airport, a fleet of more than 100 planes and thousands of trained pilots and crew.
Two previous attempts to offload the airline failed. In 2001, Singapore Airlines Ltd. dropped its bid for a stake in Air India, citing political opposition as one of the reasons.
In 2018, IndiGo, India’s biggest airline, pulled out of the running, saying it didn’t have the means to buy the carrier in its entirety and make it profitable.
The airline’s stake sale process began afresh in January 2020 but faced delays due to the Covid-19 pandemic. The government however asked potential bidders to put in financial bids in April this year before extending the deadline to Wednesday. The deadline was extended on multiple occasions prior to this but civil aviation minister Jyotiraditya Scindia, who took over a little over two months ago, said last week that the September 15 deadline would not be extended.
“We do not know for sure if it’s the Tata group that is taking us over. However we definitely intend to put our best foot forward and help the future owner bring Air India back to its former glory. We hope that the process will also enhance employees working conditions for a harmonious productive environment under the new owner,” said a committee member of the Indian Pilots’ Guild, airline’s Boeing pilots’ union.
Tatas operate a premier full-service carrier, Vistara, in partnership with Singapore Airlines and own a majority stake in AirAsia India. It was not immediately known if the group put in the bid on its own or through budget carrier AirAsia India, agencies reported.
Experts said the confirmation of bids was an important development. “Submission of financial bids is the most important step. This is the first time that the airline has got its financial bids. Moreover since there are two bidders, the process will be faster and we will have the new bidder taking up by December. According to me, the coin will swing in Tata Sons’ favour,” said CS Subbiah, former CEO of Alliance Air, regional arm of Air India.
“Air India is potentially a strategic opportunity but with high structural complexity. Investment in Air India will bet on Indian aviation’s long term potential- which is significant- but keeping in mind the massive cost of restructuring and the continuous flow of funding required to turnaround. I don’t think government of India should expect anything significant from Air India’s privatisation and may require to make the offer viable given the very poor financial and operational condition of Air India,” said Kapil Kaul, chief executive officer of CAPA advisory.
