Zero bidders for debt-stricken Air India as deadline closes

Roman Schwartz
June 3, 2018

The aviation secretary further added that the government meant to signal to the market that complete freedom would be given to the buyer of Air India, but said he could not comment on whether the end of 2018 would continue to remain the target for the stake sale. "We were certainly looking forward to better participation than this", Choubey says.

The Indian government's offer to sell stakes in Air India has failed to draw a single bid so far, underlining the challenge it faces in fixing the debt-laden state carrier, as well as meeting a broader target of stake sales in government-held firms.

"Further course of action will be decided appropriately", the ministry said in its tweet. The government had to recently abort its plan to divest 51 per cent in helicopter operator Pawan Hans due to tepid investor response.

Sources claimed there was little chance of disinvestment taking place now given that the 2019 general election is approaching.

The government had not received any bids for Air India (AI) till Wednesday afternoon, with the expression of interest (EoI) required to be submitted by 5 pm on Thursday. Some media had reported that Singapore Air, Qatar Airways and conglomerate Tata Group were potential bidders, but in the end none showed up.

"They (government) will have to revisit the whole thing now", said Dhiraj Mathur, partner and leader (aerospace & defence), PwC India.

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Such a divestment plan would have invited huge interest from domestic airlines-national and regional-in the belief that each would be taking on a smaller, yet manageable, proportion of Air India's ₹52,000-crore debt.

The airline is a joint venture between the Tatas and Malaysia's AirAsia Berhad, where the former has 51 per cent stake.

The airline has also not turned a profit since 2007, and any buyer would have to take on about $5bn (£3.6bn) of debt. Definitely, with a privatized Air India in the market, there will be a new stronger player with more efficiency in its operations in the industry, and other Airlines will have to up their game.

As per PIM, Air India and Air India Express would retain Rs 24,576 crore excluding net current liabilities after the sale. The investors have found this a big dampener.

An Air India Airbus A320 neo plane takes off in Colomiers near Toulouse, France, December 13, 2017. "Dropping the divestment case post this failure will be unfortunate", said Kaul, adding that he expects the government to quickly address structural issues and resume the process at the earliest. In the past two decades, Air India lost out to carriers such as Singapore Airlines Ltd. and Emirates that expanded flights to India, the world's fastest-growing major aviation market.

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