The government has drawn a blank on the 76% stake sale in Air India (AI) with not a single player putting in an expression of interest (EoI) to buy the state-owned carrier before the deadline ended on Thursday. There is no plan to extend the deadline and a spokesperson for the government said on Thursday a “further course of action will be decided appropriately”. Industry watchers said those interested in buying AI were probably spooked by the government’s insistence on retaining a 24% stake despite suggestions it should exit the airline completely. Although this was a minority holding, buyers feared a lot of interference.
“Partnering the government in a consumer-centric business, overloaded with people, was not a comforting proposition,” explained an industry expert. Moreover, analysts said, it would be difficult to leverage AI’s bilateral agreements and the presence on prime routes, both in India and overseas, if it was to be run an “arm’s length” basis. That would not have allowed for synergies with the buyers’ existing airline operations. Disallowing foreign entities from holding a share of more than 49% of the 76% equity being sold was also a dampener, sector watchers said.
IndiGo Airlines, which was eyeing the international operations of AI and Air India Express, backed out since the carrier was being sold in its entirety. The civil aviation ministry said in a tweet on Thursday: “As informed by the transaction adviser, no response has been received for the expression of interest floated for the strategic disinvestment of Air India.” EY is the transaction adviser for the process.
Civil aviation secretary RN Choubey said that the government had hoped for good participation by private players but this had not materialised. The government, he said, would go back to the drawing board. “There is a process which department of investment and public asset management undertakes. It involves going through the evaluation committee — a core group on disinvestment headed by the Cabinet secretary. Then the alternate mechanism (group of ministers) takes a call on it. We hope to start this process within two weeks,” the secretary said. Although the government clarified there are no pension costs/liability on AI as pension payments are under defined contribution by employees, it has offered no details yet.
AI’s total debt as of March 2017 was `48,781 crore. The government committed to absorbing a major part of the debt and only passing on around Rs 24,000 crore. However, analysts had pointed out this would be very difficult to do.
In March the government brought out a preliminary information memorandum (PIM) for the sale of AI, Air India Express and 50% in its ground-handling joint venture with Singapore Terminal Services, AISATS. After an in-principle approval by the Cabinet Committee on Economic Affairs headed by finance minister Arun Jaitley in June 2017, the strategic disinvestment process was kicked off. Choubey said the PIM was a good enough document and that it ought to have given interested parties comfort.