The NDA government’s fresh offer of a sweetened deal for selling the loss-making Air India is a welcome move as it addresses some of the key concerns of prospective buyers. The offer of 76% stake sale, made in 2018, had no takers. Now, the government will offload its entire stake, a move that is likely to encourage bidders because it implies full operational freedom to run the carrier. Learning lessons from the past, the government has taken a prudent step to address the airline’s massive debt which has been a major stumbling block for prospective buyers. It has transferred part of the debt to a special purpose vehicle. And, the debt on the books of Air India at the time of transaction would be frozen at Rs 23,286 crore. Apart from lowering the net worth criteria for bidders from Rs 5,000 crore to Rs 3,500 crore, the bid document has also tweaked eligibility norms with consortiums being given greater flexibility. All this will surely make the bid terms attractive, though concerns remain about legacy issues. With the collapse of Jet Airways, Air India’s competitor in both domestic and international markets, this revised bid structure should be attractive to the investors. As part of strategic disinvestment, Air India would also sell 100% stake in low-cost airline Air India Express and 50% shareholding in AISATS, a joint venture between Air India and Singapore Airlines that offers ground handling services. The management control of the airline would also be transferred to the successful bidder.
The new buyer will get a total of 146 aircraft and also benefit from as much as 50% of the international market share held by Indian airlines as well as 4,400 airport slots at airports in the country and 3,300 slots in 42 countries, which will be available at least for six months after the sale is complete. Moreover, given the number of aircraft owned by Air India and its low-cost subsidiary Air India Express, a buyer can recover a major portion of the investment by adopting sale and leaseback of airplanes. The government must make a clean exit from the airline business to allow taxpayers’ funds to be better utilised for social agenda. There is a strong case for privatising the state-owned airline burdened by a poor legacy of public-sector corporate culture, political interference and bureaucratic controls. Earlier, the suitors were wary of political interference that joint ownership with the government could have resulted in. The fresh offer signals a clean exit on the government’s part, though it restricts effective control of Air India to Indian entities. However, this is in tune with the existing FDI policy governing the aviation sector. Hopefully, the Maharaja will find a suitor this time.