State attempts to flog Air India stall at takeoff
The Indian government’s attempt to sell debt-laden national carrier Air India is in danger of hitting the skids as a key deadline looms with no bidder in sight.
Prime Minister Narendra Modi’s administration announced in March that it would privatise the beleaguered airline. But the plan has struggled to get off the ground with several prospective buyers ruling themselves out.
“Conditions put forth by the government with regards to debt and employee costs are restrictive and have put off investors,” aviation expert Amrit Pandurangi told AFP.
“The government needs to address the concerns of the private investors if the stake sale is to move forward,” the independent analyst said.
Air India, founded in 1932, was once the country’s monopoly airline, known affectionately as “Maharaja of the skies”. But it has been haemorrhaging money for years as it has slowly lost market share to low-cost private players in one of the world’s fastest-growing airline markets.
Successive governments pumped in billions of dollars to keep it afloat before Modi’s cabinet in 2017 gave the goahead to start the process of selling the flagship carrier.
The government wants to sell a 76% stake in the 86-yearold airline and offload $5.1bn of its debt in one of India’s biggest divestments.
But the proposal has failed to fly with several major airlines, including IndiGo, now India’s No 1 airline, and Jet Airways, which said in April they were out of the running after reviewing government bid documents. Analysts said the company’s large debts and generous pension schemes put off buyers.
Air India is about $8bn in the red and reported losses of almost 58-billion rupees ($866m) for the financial year ending March 2017.
“We don’t think any of the Indian airlines have the financial strength to bid for Air India,” Binit Somaia, South Asia director at the Centre for Aviation, said.
Airlines are also being deterred by the sale terms, experts say. The documents state the buyer has to purchase all of Air India’s six entities, three of which are running at a loss.
IndiGo said it was interested only in Air India’s international routes and not its unprofitable domestic operations.
“IndiGo has been a highly successful carrier. It is a good decision on their part to focus on organic growth,” said Somaia.
Under any deal the government would retain a 24% stake. Its insistence that the winning bidder cannot merge the airline with existing businesses as long as the state keeps its stake is a major stumbling block.
Last week, the government extended its deadline to May 31 for expressions of interest after none was received.