New Delhi: After years of waiting and a couple of failed attempts, the government has finally managed to make substantial headway in its attempt to sell off Air India, the loss-making national carrier.
Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management, tweeted that the government has received multiple expressions of interest for the strategic disinvestment of Air India. “The transaction will now move to the second stage,” he said.
Multiple expressions of interest have been received for strategic disinvestment of Air India. The Transaction will now move to the second stage. pic.twitter.com/YJ0fQLK5Hl
— Secretary, DIPAM (@SecyDIPAM) December 14, 2020
The Tatas founded Air India before it was nationalised in 1953, and currently have two joint ventures in the aviation space — Vistara, a joint venture with Singapore Airlines that is a full service carrier like Air India, and Air Asia India, a joint venture with Air Asia that’s a low-cost carrier.
However, the total number of bids for Air India and the identities of the other bidders haven’t yet been revealed.
Repeated attempts to sell
Air India has a large network of routes, prized slots in Indian aviation and in many countries, a strong fleet of planes and trained, experienced staff, making it a coveted airline — if its debt can be removed. Air India’s debt is estimated at more than Rs 60,000 crore, and the government has been forced to make repeated infusions into the airline to keep it afloat.
The Narendra Modi government had initially approved the plan to sell Air India in 2017. In 2018, it took the process forward and declared its intent to sell 76 per cent of its stake in the airline. However, the government received no interest from any potential investors, partly on account of the worries of government interference because it would retain 24 per cent stake, and the debt that the potential bidder would have to take on.
The government revived its attempt to sell Air India in January this year, but with many changes. It proposed to sell its entire 100 per cent stake and also fixed the debt retention.
However, the Covid-19 pandemic and its impact on the aviation industry again raised question-marks about the sale. Based on feedback from potential buyers, the government further sweetened the deal in October this year, stating that Air India will be valued based on its enterprise value, effectively factoring in the airline’s debt into the valuation considerations.
The government has also addressed a key investor concern and made it easier to reduce employee costs. The airline can now ask its employees to proceed on leave without pay for up to five years.