Govt expects offers to ‘pour in’ at the last hour
With just a day to go before the deadline, the government has not received any expression of interest (EoI) from potential buyers for a controlling stake in state-owned airline Air India. The last date for submitting EoIs is Thursday.
“We have not received any EoI for Air India,” Civil Aviation Secretary Rajiv Nayan Choubey told media. However, he remained optimistic that EoIs would be submitted before the deadline ends at 5 pm on Thursday. “We expect bids to pour in at the last hour,” he said and added there would be no extension of the deadline. The deadline has been extended once from May 14 to May 31.
The Cabinet Committee on Economic Affairs had last year approved the sale of a 76 per cent stake in Air India and five of its subsidiaries.
Tough bidding conditions and the government’s decision to retain a 24 per cent stake in the airline have led to the tepid interest from potential buyers.
India’s largest airline IndiGo had initially shown interest but it pulled out later citing inability to take over Air India’s domestic operations. Jet Airways said it would not bid for the stateowned airline because liabilities for the buyer would be high. “We felt this level of debt may not be appropriate for us,” Amit Agarwal, deputy CEO of Jet Airways, had said.
Air India’s new owner has to take over ~333.92 billion of the airline’s debt while the rest will be hived off into a separate asset holding company.
In April, Reuters reported that the Tata group, widely seen as a potential suitor for Air India, was unlikely to consider a bid because the government's terms were onerous.
Response of foreign airlines has not been encouraging either. British Airways cited government involvement as a possible reason for not bidding.
“I have always dismissed the idea of Air India while government ownership is involved. I do not think it will be enough to encourage us to look at it,” William Walsh, CEO of International Airlines Group (IAG), owner of British Airways has said.
Officials, however, have defended the terms of sale, saying the debt is backed by Air India’s fleet of aircraft, which it owns. “It is not a distress sale, it cannot happen that one just buys the asset but refuses to take over the liabilities,” an official said.
Minister of State for Civil Aviation Jayant Sinha has defended the government’s decision to retain a stake in the airline. “A capable private operator will turn around Air India’s operations and we will be able to pay down some of the debt we will absorb so there is logic in maintaining some residual stake,” he said.