AI sale may be a nonstarter as top contenders drop out

TAKEOFF TROUBLES Tata, Qatar, Emirates also out of the fray, putting a question mark on the disinvestment

MUMBAI: Barely a fortnight after the government released the terms for privatizing the lossmaking national carrier Air India, uncertainty looms over the sale with most of the major contenders dropping out of the race, citing restrictive terms and conditions.

In rapid succession, Interglobe Aviation Ltd, the operator of Indigo airline, Jet Airways India Ltd and the Tata Group bowed out of the race and on Wednesday major Gulf carriers Emirates and Qatar Airways too expressed their reluctance.

While an Emirates spokesperson said in an email that the airline has “no plans to buy or acquire any airline,” rival Qatar Airways denied that it is “involved in any talks regarding the acquisition of Air India”.

Another potential suitor, Spicejet Ltd, has showed no inclination to bid for the state-run airline. Its chairman Ajay Singh had earlier said that the airline was too small to bid for Air India.

Tata Group, long considered as a leading suitor for Air India, is also unlikely to bid for the airline,

reported on Wednesday, citing two identified people. The report attributed the group’s unwillingness to the terms and conditions of the sale, which it considered ‘just too onerous’. The group has not made any formal announcement about its decision.

While, Indigo indicated that it might have been interested only in the international operations of Air India, Jet Airways has said that it will not participate in the bidding process.

“Considering the terms of offer in the information memorandum and based on our review, we are not participating in the process,” Jet Airways’ deputy chief executive officer Amit Agarwal told Press Trust of India on 10 April.

Industry experts say that the government might have to amend the terms of the sale if it is to find a buyer for the airline.

“The (Air India) deal in its present form doesn’t seem to be working,” said Peeyush Naidu, a partner at Deloitte Touche Tohmatsu India LLP. “The government may need to reconsider the terms and conditions of the deal and clarify on the airline’s debt and employees.”

The problem lies in the government’s decision to sell 76% in Air India along with 100% stake in low-cost international carrier Air India Express Ltd and 50% in Air India SATS Airport Services Pvt. Ltd, a joint venture services company, and not sell individual arms or operations of the airline separately.

Amber Dubey, partner and India head of aerospace and defence at consulting firm KPMG, said that the government department overseeing the Air India divestment process, Department of Investment and public Asset Management (DIPAM), may have to go to the cabinet to bring about major changes in the terms and conditions. “Simplifying the deal structure to attract at least 3-4 serious bidders is in the government’s own interest,” Dubey added.

A civil aviation ministry official, who didn’t want to be identified, said that the government is unlikely to make major changes in the terms and conditions of the sale.