There are several deterrents to potential investors in Air India’s initial bid document, analysts and industry experts said. Some of them said the government was hurrying with the sale and that only players with very strong war chest would show interest in taking the airline on their books.
The government on Wednesday released a preliminary information memorandum inviting expressions of interest — the first stage of financial bids — for the airline. The government has decided to divest 76% in an entity which includes Air India, its fully owned regional subsidiary Air India Express and half-owned ground-handling joint venture with Singapore Airport Terminal Services, called AI-SATS.
“International routes aside, there aren’t enough incentives to entice a foreign buyer. Government retaining a 24% stake is a big put off, in our opinion, given the possibility of interference and bureaucracy (despite assurance of full management control),” said Shukor Yusof, founder of Malaysian consultancy Endau Analytics.
The government also said Rs 33,392 crore of dues, which include over Rs 8,000 crore of current liabilities, will remain with AI and Air India Express — this means the buyer will have to take it on its books. “Whoever agrees to this either has (a) lots of money to burn, or (b) enjoys high-stakes gambling,” said Yusof.
“Air India’s problems are many and complex. They’re not just about debt. It’s a toxic carrier and even with the government dangling carrots (such as the 21 acres of land in Mumbai and Delhi), it is doubtful a foreign buyer will bite. Our guess is that an Indian entity will eventually take over the flag carrier. Or the deal might not even happen,” he added.
“Why is the government rushing,” asked Mark Martin, founder of Martin Consulting. “The government has been extremely smart and proactive with putting AI on the block. Several incentives are really attractive. But AI is a mammoth airline…If the government thinks it can wrap this up before the 2019 elections, it is very much mistaken,” he added.
