Air India Will Be 100% Privatised By September; Will Tata Become The New Owner Of Air India?
The process of inviting financial bids for sale of the loss making national carrier Air India has been initiated by the government and is likely to be completed by September this year.
Indian multinational conglomerate Tata Group was known to be among one of the ‘multiple’ entities to have put in preliminary bids for buying Air India in December 2020.
The government decided to sell its entire 100% stake in the national carrier, after its amalgamation with Indian Airlines in 2007, as the carrier has been bleeding losses ever since.
Air India Sale: Financial Bids Begin
On January 27, 2020, the government invited Expression of Interest (EoI) for proposed strategic disinvestment of Air India.
The Centre has now initiated the process of inviting financial bids for the sale, taking another towards privatisation of the national carrier.
It has issued a request for proposal (RFP) to the shortlisted bidders, asking them to submit financial bids, which is expected to be done in the next couple of months.
Sources have informed that following the submissions of financial bids, the bidders will have to get security clearance from the home ministry, only after which shall their bids be considered valid. This process is anticipated to take another month.
The complete transaction is expected to conclude by August-September, once all regulatory clearances are obtained by the winning bidder.
Furthermore, sources have revealed that after analysing the preliminary bids, eligible bidders were given access to the Virtual Data Room (VDR) of Air India, following which investors’ queries were answered.
What will the AI Buyer Own?
Started as a mail carrier in 1932, Air India’s successful bidder will be given 100% control over the low-cost arm Air India Express and 50% of the airline’s cargo and ground handling services, AISATS.
The bidder will also have control over the airline’s 4,400 domestic and 1,800 international landing and parking slots at domestic airports, along with 900 slots at airports overseas.
The process of Air India’s stake sale has already been delayed due to the Covid pandemic, causing the government to extend the deadline for submitting preliminary bids by five times.
Financial Bids will Likely be Under Rs 20,000 crore
The government has been failing to attract substantial interest since 2017, due to which it has now cut down the deal by allowing the potential suitors to decide on their own, the amount of the airline’s debt they would like to take on as part of the deal.
The buyer was earlier required to take over as much as Rs 23,286 crore of AI’s total debt, which exceeded Rs 60,000 crore (as of March 31, 2019), while the rest would be absorbed by the government.
By making the deal easier for bidders, senior government officials are positive of the deal’s completion this time.
The bids for AI are likely to be under Rs 20,000 crore.
“There is no choice, we either privatise or we close the airline. We run a loss of Rs 20 crore every day despite Air India making money now. Because the mismanagement has resulted in a cumulative debt of Rs 60,000 crore.”, said Civil Aviation Minister Hardeep Singh Puri, last month.