Even as the government looks to privatise Air India, at least five major airlines have refused to bid for the beleaguered state-run carrier citing various reasons including onerous terms and conditions. We take a closer look.
Even as the government looks to privatise Air India, at least five major airlines have refused to bid for the beleaguered state-run carrier citing various reasons including onerous terms and conditions. Sharing reasons as to why potential bidders have ruled themselves out of the race, Amber Dubey, head -Aerospace and Defence, KPMG India told CNBC TV18, “The way the deal has been structured, its not attractive given the debt and people issues. There are other things, the brand has to be retained, a forced IPO etc, which pose uncertainty. These are things which bidders find very onerous.” Dubey believes that the Rs 33,000 crore debt and retaining 15,000 employees people are the two major issues in the Air India privatisation process.
Kapil Kaul, CEO- South Asia, CAPA said that brand and labour are major deterrents. “I don’t expect somebody to invest billions of dollars and then be faced with union disruptions. Debt is something that can be structured, but branding and labour are the major deterrents,” he told in an interview to CNBC TV18. We take a closer look at why these major airlines have refused to bid for Air India.
Aditya Ghosh of IndiGo said in a recent statement that IndiGo may not have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations. Earlier, IndiGo was interested in acquiring only the international operations of Air India. However, the largest carrier by market share refused to bid for the airline after the government’s EOI gave no such option.
Ajay Singh, the Chairman of Spicejet said at a recent event that the budget carrier is too small to bid for the maharaja. “Air India is a national asset and I am pretty that sure there will be many takers for it like the Tata-Vistara, Jet Airways, etc. But we are too small to bid for such a large asset,” he said.
Saying that it’s a bold step by the government to divest stake in Air India, Jet Airways’ deputy chief executive officer Amit Agarwal told PTI that considering the terms of offer in the information memorandum and based on its review, Jet Airways will not be participating in the process.
Tata Group ruled out participating in the race to bid for Air India citing onerous conditions, according to a Reuters report. Interestingly, Tata Group, which jointly runs Vistara with Singapore Airlines, was seen as a potential acquirer.
While there were reports that certain foreign airlines are looking at the divestment process with interest, and even looking to team up with other airlines in a joint bid, Emirates has made in clear that they will not be participating in the process, but are open to partner with other airlines. CNBC TV18 reported Emirates saying that it has no plans to buy any airline but is open to partner with airlines where its customers benefit.