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Wed 1 Jan 2020 02:04 PM

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India's plans to sell off Air India face further delays

Uncertainties over the carrier's future liabilities and unclear title rights over many assets of Air India are cited as major factors that may keep off prospective buyers from bidding for the carrier

India's plans to sell off Air India face further delays

Though there were media reports about possible interests by Etihad Airways and Indian budget carrier IndiGo to bid for Air India, there was no confirmation on this from the two airlines yet.


India’s proposed plans to privatise its national carrier Air India may not materialise before March this year – the fiscal year-end deadline being talked about by the federal government before – with the federal civil aviation minister now refusing to draw a timeline for the sale of the airline.

“Whether it happens by March or June .... we are not slaves of certain deadlines,” Hardeep Puri, federal aviation minister told reporters on Tuesday.

"We are trying to do it (disinvestment) as quickly as possible."

The minister, however, added, “Air India is a first class airline and that there are no two views that privatisation has to be done.”

Aviation industry analysts interpreted the minister’s comment as the first hint of a probable delay in the government’s move to sell off the national carrier, despite working seriously on it for the last 2-3 months by transferring part of the debt-ridden airline’s liabilities to a government-backed special purpose vehicle (SPV) – Air India Assets Holding Ltd - and holding pre-sale discussions with some prospective buyers.

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“This (the minister’s comment) could mean that there is a possibility that the airline sale process may not be completed in the current financial year,” Soumyo Roy, a leading analyst and stock market participant, commented.

Saj Ahmad, senior analyst at London-based StratAero Research, said he also did not see any major foreign airline showing interest in Air India

“The airline’s inherent legacy problems means people will always remain put off,” Ahmad said, adding that “privatisation has failed before and will likely to fail again.” 

Complications

​Uncertainties over future liabilities - including that related to serving and retired employees of the airline - and unclear title rights over many assets of Air India are other major factors being cited by airline industry insiders that may keep off prospective buyers from bidding for the carrier.

“Ownership of assets by Air India, especially that of land and buildings it owns in several states across India, is highly complicated as many of these assets were given by various state governments to Air India because of its public sector status. It is not clear whether the new buyer will have the rights on these assets,” a senior official of an Air India sister concern, who did not want to be identified, told Arabian Business.

“Any prospective buyer will consider all these aspects before showing any serious interest in the airline,” the official added.

Airline bids

Though there were media reports about possible interests by Etihad Airways and Indian budget carrier IndiGo to bid for Air India, there was no confirmation on this from the two airlines yet.

A senior executive of IndiGo had informally told Arabian Business earlier that the airline had no interest to bid for Air India.

Aviation minister Hardeep Puri has said on Tuesday that his ministry will try to issue expression of interest for Air India in the coming few weeks.

Significantly, the possible delay in the move to privatise Air India comes at a time when senior officials at the carrier sounded alarm bells that the carrier might well go the Jet Airways way if a prospective buyer does not come on board by June next year.

Last week, India's federal government provided a $70 million (Rs 5 billion) guarantee – as against the airline’s demand for a $336 million (Rs 24 billion) - to enable Air India to borrow fresh funds for operational requirements.

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