The government will not look at making any revisions to the transaction details for the divestment of Air India, sources told FE, as it is seeing enough interest from prospective overseas bidders.
The government will not look at making any revisions to the transaction details for the divestment of Air India, sources told FE, as it is seeing enough interest from prospective overseas bidders. This assumes significance in light of homegrown budget airline IndiGo, the first airline to express its interest in buying into the ailing national carrier, pulling out from the race citing its inability to turn around the airline and consummate the deal in its current form. “There are a lot of interested and probable bidders who are looking at the transaction and have shown interest and are figuring out the document, these carriers are interested in the domestic operations of Air India as well, and for a peculiarity and singular requirement of one probable bidder we cannot change the terms,” said a source directly involved in the divestment process, not wanting to be identified. He added that among the global carriers that have shown interest are German carrier Lufthansa, British Airways and Singapore Airlines besides a few West Asian and Southeast Asian airlines. A second source confirmed that Lufthansa has appointed someone to look into the details of the proposed sale of India’s national carrier. The last date for interested parties to submit written questions to the government on the preliminary information memorandum (PIM) is April 16 and the government will get back to them with answers to these by April 30. The deadline for submitting expression of interest is May 14.
The current transaction as spelt out in the PIM brought out by the government in March offers a 76% stake in Air India and 100% stake in Air India Express (AXIL), the fully-owned budget arm of Air India clubbed together with a 50% stake in the ground handling joint venture of Air India and Singapore Airport Terminal Services (AISATS). The government has appointed global advisory and audit firm EY as the sole transaction advisor for the divestment process. IndiGo conveyed to its investors last week that it was primarily interested in Air India’s international operations and its low-cost international arm AXIL. “IndiGo feels that it already has a strong domestic market presence with nearly 40% market share but its demand is something different and difficult to comply with as it will be very difficult to de-merge the two businesses now. If all the interested parties were wanting the same thing it would have been a different issue,” the source said. De-merging the two businesses of Air India domestic and international will prove to be a challenging and long-drawn process and there is currently no appetite in the system to even consider separating the two. It was in 2007 that erstwhile Air India (international) and Indian Airlines (domestic) were formally merged into a new company, National Aviation Company of India. It has been, by far, one of the most lengthy and difficult merger processes which took endless years to get completed and synergised. In 2012, the then civil aviation minister Ajit Singh went on record to say that after all merging the two airlines was a big mistake but de-merging them would be a lengthy business and a futile exercise. What IndiGo was eyeing was the international operations of Air India, which has a lion’s share of 44% of overseas business among the domestic players — the rest is shared by IndiGo, Jet Airways and SpiceJet. The national carrier has 2,543 international slots, including to the US, the UK and far east, and bilateral rights for 9,70,389 seats negotiated with numerous countries.