Govt to give up management control
The Civil Aviation Ministry has sought Expression of Interest (EoI) for the 76% stake sale in the loss-making Air India and two of its subsidiaries.
According to the memorandum, the government plans to offload 76% per cent equity share capital of the national carrier as well as transfer the management control.
Management or employees can participate directly in the bidding process or by way of forming a consortium.
Ernst & Young LLP India has been appointed as transaction adviser for the disinvestment process.
Industry observers said the deal is attractive only if the Indain government refrained from maintaining any influence on the day to day running of Air India. It has to be a truely commercial operation on lean cost basis.
The national airline is an attractive acquisition for its leadership in the Indian market as well as strong network globally, said the observers.
Potential buyers, mostly international airlines, see the deal well above US$5 billion on the least but with full commercial operation control.
Yet the Indian government’s decision to retain 24% stake in the airline will make deal negociation difficult especially when it comes to placing employees and compensation for those almost close to or due to retirement.
Unions, the observers believe, now have better understanding of the benefits of a privatized Air India.
Management and employee buy over of the airline is possible but it would be challenging in financing the deal “amidst the traditionally noisy democracy in India where politicians will take all chances to be in the lead”.
According to the information memorandum, the transaction will involve Air India and its low cost arm Air India Express. Also in the offer is Air India SATS Airport Services Pvt Ltd, an equal joint venture with Singapore-based airport terminal services company, SATS Ltd.
In June 2017, the Cabinet Committee on Economic Affairs (CCEA) gave in-principle approval for the strategic disinvestment of the airline, which has a debt burden of over Rs50,000 crore.
Airline sources said it will be the single biggest deal that would reform the industry in the world’s fastest growing market.
A privatized Air India could change the way civil aviation sector works in India.
International operators Emirates, Qatar Airways and Singapore Airlines, with a large volume of Indian origin passengers from their home based airports, have been studying the Indian market for past several years.
“It is a market with plenty of opportunities and hundreds of new destinations, both big and small, which put passenger volume growth in the double-digit plus range,” said an regional civil aviation source.
“The world will watch this deal with strong interests,” the source said. fii-news.com
