With the government taking quick steps for divesting its stake in Air India, Civil Aviation Secretary R N Choubey says that a foreign player has expressed interest in acquiring 49% stake in the state-run carrier. According to a report in the Times of India, Aviation secretary R N Choubey said that the foreign player has shown an “unsolicited expression of interest for AI’s airline arm.”
While the identity of the foreign player and whether it is an airline is not yet established, a few foreign players are reportedly looking at AI’s disinvestment process with interest. Even as the government looks to privatise the carrier by the end of 2018, Mohnish Pabrai, a leading US based value investor says that a combination of IndiGo and Singapore Airlines would be ideal buyer for the state-run carrier.
“In my opinion, the ideal buyer for Air India is a combo of Singapore Airlines and Indigo. An entity like Singapore Airlines coupled with people like Rakesh Gangwal who used to run United Airlines, used to run Air France and now is the promoter of IndiGo, should be brought together and the magic will happen,” Mohnish Pabrai told ET Now.
Interestingly, while the Union Cabinet allowed 100% foreign direct investment into Indian airline operators under the automatic route, it has different rules for state-run Air India and allowed foreign airlines to invest up to 49% under the approval route, subject to the conditions that: (i) Foreign investment(s) in Air India, including that of foreign Airline(s), shall not exceed 49 per cent either directly or indirectly ensuring that substantial ownership and effective control of Air India shall continue to be vested in Indian National.
After the Union Cabinet approved investment of up to 49% in Air India, Minister of State for Civil Aviation Jayant Sinha says that the government wants Air India to remain an Indian carrier. “We want Air India to be an Indian carrier. When you look at what the foreign ownership caps are around the world, they are 49% or below 49%. The typical air services agreement that is signed for bilateral rights also in intended to ensure that substantial ownership and effective control stays with nationals of the country,” Jayant Sinha told CNBC TV18 last week.
Sharing his viewpoint on the government’s decision to cap foreign investment into Air India, Mohnish Pabrai said, “I would make it that even a foreign entity can come in and buy 100% of Air India without any issues. I would focus on other pieces which are more important and which is taking care of the people, thus creating an entity that has a strong viable future. It can go head to head with Emirates, head to head with others — the best in the world and beat them at that game that is what I would focus on.”