Air India Sale Now Open To Firms Beyond Aviation Industry!

The government has opened the sale of Air India to firms outside the aviation sector, stating that companies having sufficient financial backing and the ability to run the airline could buy the 76% stake on sale.

This announcement was made yesterday by Ministry of Finance after many airlines in India developed cold feet to bid for Air India due to the tough conditions laid down by the government and doubts about how much the airline is actually worth. Domestic carriers IndiGo and Jet Airways have indicated they won’t be bidding for the airline unless the current bidding conditions are changed.

According to the secretary of Department of Investment and Public Asset Management (DIPAM), Mr. Neeraj Gupta, the eligibility of any potential bidder is based on its financial capability and does not require any prior experience in the aviation industry. The main criteria is to have the financial backing and the capability to turn the airline around.

There have been several queries from foreign airlines, private equity and venture capital investment firms for the privatisation of Air India. The VC and PE firms have the option of partnering up with other domestic companies to bid for the 76% stake in the airline.

According to the bid document released last month –

• The investor’s net worth should be more than Rs 5,000 crore
• The investor should have a track record of reporting profit after tax (PAT) in three of the previous five financial years
• The government would retain 24% in the airline and the prospective investor is obligated to list the airline within a specified time-frame.
• The last date for submission of expression of interest for Air India is May 14.
• Of the Rs 60,000 crore liability of the airline, the investor would have to take over about Rs 33,000 crore debt

Employee unions are concerned over the job security of its employees’ once the deal is done and the airline is privatised. The government has assured them that the company which will take over the airline will follow the ‘best industry practices to ensure that the jobs of the employees are safeguarded. Air India and its two other units up for sale have 11000 employees working for them.

Allowing investors from other industries to partner with business in India for bidding, will widen the pool of potential bidders for the airline and may lead to an intense bidding war in the future. But, we will surely be able to know who has control over the 76% stake in Air India, 100% stake in Air India Express Ltd and 50% stake in Air India SATS Airport Services Pvt. Ltd by next month.