Govt renews push to sell Air India

Wednesday 29th January 2020 05:04 EST
 
 

The government of India offered for sale its 100% stake in Air India and AI Express - instead of 76% in the first attempt - and the entire 50% it owns in ground-handling joint venture AI-SATS. Learning from the 2018 experience, eligibility terms have been relaxed for bidders too and they will be expected to take on £3.24 billion of debt-cum-liabilities - essentially current value of 146 aircraft they will be getting - of the total amount of £8.88 billion with the government keeping with it £ 5.63 billion.

Unlike the 2018 divestment attempt, there is no Jet Airways around this time (it shut down last April), making AI the only Indian carrier with medium- and long-haul wide-body aircraft, crew for them, flying rights and slots at airports across North America, Europe, Australia, Far East and Africa - a perfect buy for someone like Vistara or IndiGo to spread their wings overseas quickly instead of years it takes to have a network as widespread as the Maharaja has.

With this USP, the government issued the preliminary information memorandum (PIM) for AI’s strategic disinvestment where bidders, whether individual companies or consortia with a minimum net worth of £350 million - down from £500 million last time - can submit their bids for the airline by March 17.

Indian carriers with negative net worth, which includes most of them except IndiGo, can also bid if they have a JV partner with whom they meet the minimum criteria norm. Qualified bidders will be announced on March 31, after which the request for proposal will be issued. If all goes well, by July or September, the Maharaja may have a new owner, who will need to retain the brand name AI.

AI’s land & building are not part of selloff

While the AI has a debt of over £6 billion, bidders will be expected to take £2.33 billion, which the written down value of AI and AI Express aircraft. Since the government has decided net assets will be equal to net liabilities for bidders, the latter will need to take over £877.15 million as of March 31, 2019. This exact figure will be decided on the date of the transaction though the total burden is expected to be about £3.24 billion.

The government will take over the remaining £5.63 billion of debt and liabilities and transfer them to a specially-created special purpose vehicle AI Assets Holdings Ltd. Describing AI as a “great asset” with a young fleet of planes, especially widebody aircraft that fly across the globe, aviation minister H S Puri said: “Despite infusing £3.05 billion in the AI since 2012, the airline has been running into losses year after year. Due to its accumulated debt of about £6 billion, its financial position is very fragile. AI is in a debt trap that can be turned around by privatising it and we have learnt lessons from the 2018 bid. Lots of people have directly come to us and there is tremendous interest in AI (among potential buyers).”


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