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Mon 27 Jan 2020 11:21 AM

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India calls for Air India privatisation bids

While foreign airlines or investors can bid for Air India, they will have to bid as part of an Indian consortium

India calls for Air India privatisation bids

India has set in motion the privatisation process of national carrier Air India, with the government on Monday issuing global invitations for expressions of interests (Eols) from potential investors to acquire an 100 percent stake in the debt-ridden airline.

Air India Express, the low-cost sister airline of Air India, and Air India SATS Airport Services Private Limited (AISATS) – the airport services joint venture of the national carrier – will also be part of the privatisation deal, according to the Eol document.

While foreign airlines or investors can bid for Air India, they will have to bid a part of an Indian consortium as India allows only up to 49 percent foreign equity holding in airline ventures.

The last date for bid submissions is March 17, with qualified bidders to be notified on March 31, according to a bid document issued by the federal Department of Investment and Public Asset Management (DIPAM).

Global management consultancy firm EY is the Indian government’s transaction advisor on the Air India privatisation process. The government owns an 100 percent stake in Air India and subsidiary Air India Express.

AISATS is a joint venture partnership between Air India and Singapore Airport Terminal Services (SATS) Limited, which provides cargo and ground handling services.

This attempt will mark the second time in as many years that the Indian government will be attempting to privatise Air India, with an earlier attempt in 2018 drawing no investors showing any interest in bidding for the debt-ridden airline.

As per the Eol document, individuals and consortia can bid for the airline.

In order to make the deal attractive to potential investors, the federal government this time around has significantly relaxed bidding norms in terms of debt and eligibility.

The prospective buyer of Air India will inherit about $3.26 billion of debt out of the total over $8.4 billion debt of the airline.

As for eligibility, the lead member of a consortium can have 26 percent shareholding, as opposed to the 51 percent condition set last time.

The minimum shareholding in a consortium has also been eased to 10 percent, potentially enabling more entities to bid as part of a consortium. The net worth for eligible bidders has been relaxed to $490 million (Rs 35 billion) from $700 million (Rs 50 billion) set at the previous bid process.

The Nareandra Modi-led government in 2018 had invited EoI to divest a 76 percent stake in Air India but found no takers. Besides the government’s unwillingness to let go of the entire stake, the huge liabilities and bloated workforce of the airline were said to be the reason for lack of interest by potential bidders.

Air India, which accounts for 12.7 percent of India’s air traffic market share, reported a provisional net loss of about $1.2 billion in FY19.

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