Long wait for buyer
Despite not being a minister, here’s why I would be wary of touching this "gold mine"
On January 27, the revised document asking for expression of interest from anyone interested in buying the national carrier, Air India, was released. Anyone who has looked at it closely will agree the document shows the government’s willingness and even eagerness to sell the airline: 100 per cent equity sale instead of the earlier 76 per cent, a lower debt left on its books and easier terms for the buyer. But no matter which way one looks at it, buying this “gold mine” is not for the faint-hearted. Let me elaborate.
To begin with, there’s a ~23,286.5 crore debt i n my head. Almost the entire debt of the airline has been secured by offering government of India guarantees. While I understand that some of the more difficult debt — debt offered by international l enders contingent upon a sovereign guarantee — has been removed into the special purpose vehicle, a large part of the debt that remains is also backed by government guarantees. Moreover, the lease rentals of 21 B787s is guaranteed by government.
What happens to all this? Will the buyer be required to provide counter guarantees for this? Which lender will agree to let go of the sovereign guarantee? If the debt is to be restructured, would the additional liability fall on the new owner? A senior MOCA official told me that the government would find a way to deal with this before it issues the request for proposal. As of now, the matter remains up in the air.
Second, the document requires the buyer to maintain the Air India brand even after he assumes charge. Why? If the brand is indeed so valuable, the new owner will naturally continue with it and the stipulation is superfluous. And if he doesn’t see enough value, why should he be forced to continue with it? If a price for sale has been agreed on and the deal is signed and sealed, why should the government care what happens to the brand? This is a bit like insisting the nameplate of your house remains unchanged even after the new owner with a different surname moves in.
In fact, I am unable to understand why the government even cares if Air India remains a going concern or not. After all, there are other airlines that do the required job and it’s not as if passengers would be stranded.
And if it does indeed care, why does it care only for the next three years? Why three and why not five?
But for many in the industry (this is definitely the deal-breaker for me), the most problematic issue with the airline remains its staff and employees. Air India has long been an employment vehicle for the government filled with non-performing human capital. The employees are pampered both in terms of how little they need to do and in terms of various benefits offered by the airline, far wider than any private carrier would condone. Yes, airline employees are entitled to free passages across airlines but the definition of family doesn’t extend as wide as it does in Air India. Retired employees do get some concessions, including medical benefits, but nothing akin to what the national carrier offers. What happens to all this?
A group of employees, I raised this matter with, claimed that if anyone messes with their entitlements, they would have no option but to move the courts. Taking this a bit further, what happens then if I fire someone belonging to the backward classes or minorities? Will I be hauled up before the SC/ST Commission and other bodies who protect their interests? Do I fancy spending my time defending my actions or putting my house in order?
As I understand it, the conditions to protect employees are yet to be decided and would be included in the share purchase agreement. The government needs to tread carefully here to ensure these are not a deal breaker.
I’ll end with one last message for those who are still not convinced that sale is the only way forward — there are still many ideological dissenters — let me end this debate by drawing your attention to some of the recent routes the airline has embarked upon. On January 20, the airline announced twice weekly flights between Bhubaneswar ( Odisha) and Surat (Gujarat). On January 27, a daily UDAN flight between Kolkata ( West Bengal) and Jharsuguda (Odisha) was launched. A few days later, on January 31, Bhubaneswar was further connected to Varanasi.
When I asked a former CMD and a rival CEO if there was a method to this madness, pat came the answer: To defy the slowdown and ensure losses grow at a healthy clip.