Air India on the Sales Block Again

 - August 21, 2019, 10:49 AM
The sale of Air India would not include ground handling or maintenance services. (Photo: Neelam Mathews)

India’s government will put up for sale debt-ridden national carrier Air India for the second time in a year, but this time with different riders. The Expression of Interest (EOI) released last year offering a 76 percent stake attracted no bidders, so the government has raised the offer to a 95 percent stake in the carrier. It plans to release the EOI in October and intends to conclude the transaction at the close of the current fiscal year, ending in March 2020.

Center for Aviation (CAPA) said it welcomed the government’s decision to revisit the privatization of Air India. While CAPA expects authorities to fast-track the process, the group has suggested the bidders get at least four months to conduct appropriate due diligence.

Meanwhile, plans to add to the fleet remain suspended until a final decision gets made, said Shyam Sundar, CEO of Air India’s regional subsidiary, Air India Express. That airline reported a net profit last quarter.

“The privatization is a long-overdue step and provides a big opportunity to bidders given Air India’s large network, international rights, and manpower,” said Vishok Mansingh, CEO at Mumbai-based Vhan Aeroservices. He also made note of Air India’s recognized brand and hoped it would retain its name for the sake of “brand equity.”

“Once relieved of most of its working capital loans, Air India represents an attractive opportunity,” said CAPA in a recent report. “A commercially run, debt-free Air India no longer needs to be protected,” said CAPA in a recent report on Air India. It has also suggested more transparency through comprehensive disclosures on Air India’s finances and labor contracts, including any ongoing negotiations. “These are two of the most sensitive issues that will impact interest and valuations,” added CAPA. “A large proportion of the technical staff is due to retire within the next five to ten years, which is an issue the new owners will need to prepare for.”