NEW DELHI, Jan 27, 2020, SCMP. New Delhi intends to sell its entire stake in the debt-crippled national carrier Air India, the government announced on Monday, after failing previously to secure any bids for a majority share. The airline, which owes more than US$8 billion, has been struggling to pay salaries and buy fuel, with officials recently warning it would have to shut down unless a buyer was found, South China Morning Post reported.
On Monday the civil aviation ministry released a document inviting bids for a 100 per cent stake, setting March 17 as the deadline for initial submissions. Potential buyers would have to assume around US$3.26 billion in debt, the document said.
Founded in 1932 and formerly India’s monopoly airline, the company was once known affectionately as the “Maharaja of the skies”. But it has been haemorrhaging money for more than a decade and has lost market share to low-cost rivals in one of the world’s fastest-growing but most competitive airline markets.
In November aviation minister Hardeep Singh Puri had said the airline would “have to close down if it is not privatised”.
State-run oil companies halted fuel supplies to Air India in August after it fell behind on payments, though the firms agreed to lift the suspension a month later after talks brokered by the government.
The country’s aviation sector has been stuck in a slump since the collapse of Jet Airways last year.
Substantial ownership and effective control of the airline must remain with an Indian entity, the government also said.
The potential sale of an airline kept aloft by a US$4.2 billion 10-year bailout in 2012 coincides with the administration of Prime Minister Narendra Modi divesting money-losing assets to manage the fiscal deficit.
The latest offer should garner significant response partly because it involves a clean exit by the government, said CAPA aviation consultancy India head Kapil Kaul.
“As the entire debt excluding aircraft debt is taken out of the deal, it signals a very determined effort to exit Air India to allow taxpayers’ funds be utilised for the government’s social agenda,” Kaul said.
The government in 2018 tried to sell 76 per cent of Air India and offload about US$5.1 billion of its debt.
InterGlobe Aviation Ltd’s IndiGo and Jet Airways – which has since collapsed – initially showed interest but opted out after the sale terms were disclosed.
Steel-to-autos conglomerate Tata Group, widely viewed as a potential suitor for Air India, also decided not to bid after deeming the terms too onerous.
The airline has more than 13,000 permanent employees and fixed-term contract staff, including more than 1,850 pilots and 4,600 cabin crew.
A successful bidder would win control of the airline’s 4,400 domestic landing and parking slots and 1,800 international slots at Indian airports, as well as 900 slots at airports overseas.
While several of Air India’s subsidiaries will be excluded from the sale, the buyer will get 100 per cent of low-cost arm Air India Express and 50 per cent of AISATS, which provides cargo and ground handling services at major Indian airports, the bid document showed.
Additional reporting by Reuters