Foreign Airlines Show Interest In Air India Sale As Domestic Carriers Steer Away!

It seems like no domestic carriers will be bid for Air India as the airline giants, IndiGo and Jet Airways, have released statements saying they will not take part in the national carriers disinvestment process. Reports also suggest that Tata Group will also be pulling itself out of the race.

Over the past few days, the airlines have blamed the terms of the sale for their unwillingness. In a statement given by Jet Airways last week, they said that they welcome the government’s move to privatize Air India. However, based on the review conducted by the airline and the terms of the offer in the memorandum, they will not be taking part in the bidding process.

The disinvestment process is divided into two stages:

• PIM (Preliminary Information Memorandum) which involves receiving the letters of interest from potential bidders.
• RFP (Request for Proposal) is the second stage of the bidding process where more details about the sale will come to light, if and when it happens.

Here are some of the terms mentioned in the memorandum that the bidders have to take responsibility of –

• Under the proposed sell-off, the new buyer will have to take over 61 percent (or Rs 33,392 crore) of the debt burden. The current Debt of Air India amounts to Rs 54,742 crore.
• The buyer has to safeguard the interests of 10000 – 15000 Air India employees.
• The Owner has to list Air India on stock exchange under terms that will be decided by the government
• The buyer has to keep the airline’s operations away from other businesses of the owner.

It is believed that British Airways, Singapore Airlines, Etihad Airways and Lufthansa have shown interest in buying Air India. Only Etihad Airways and Singapore Airlines confirmed their interest in buying the national carrier.

Etihad Airways is reportedly looking as a strong contender to bid for Air India as they have sent out feelers to the Reliance Anil Dhirubhai Ambani Group. Etihad is looking for partners to bid for Air India and is in discussion with companies other than the Anil Ambani group.

Air India has been struggling with competition from IndiGo and Jet Airways in the Indian markets. Air India market share in India has also gone down when Indigo and SpiceJet set out to grow their network. Its market share has come down to 13 percent which is nowhere comparable to the 36 percent share they had a decade ago.

The government has decided that there will be no change in the terms unless there are not enough bidders for the airline. For now, it seems like a game of wait and watch!