The BJP government is gearing up for a second attempt to sell India’s national carrier Air India and Mukesh Ambani-led Reliance Industries is quickly emerging as the front runner among investors.
India’s Maharaja of the Skies Air India is up for its last bid for survival. The central government has said that the national carrier will have to shut shop if the latest bid to sell the debt-ridden airline fails. On similar lines, a report from April 2019 had suggested that Mukesh Ambani-led Reliance Industries was mulling interest in bailing out Air India.
The central government has said that the national carrier will have to shut shop if the latest bid to sell the debt-ridden airline fails.
The last effort to privatize Air India by the BJP government a year and a half ago had failed to find buyers. While Reliance was not in the mix then, the Indian Express now puts the spot on the Ambani conglomerate, which certainly has the buying power and currently not venture in the scheduled commercial aviation sector.
As per comments from Union Civil Aviation Minister Hardeep Singh Puri, running Air India will be difficult if not privatized. In fact, Puri said, “If we don’t privatise Air India, where will we get the money to operate it? Right now, Air India is a first-class asset and we will get bidders if we sell it. And if we take ideological positions, then it will be difficult to run it.”
In April 2019 reports had surfaced that Mukesh Ambani-led Reliance Industries was mulling interest in bailing out Air India.
Furthermore, earlier in the month, Union Finance Minister Nirmala Sitharaman had said that the government aims to initiate the complete sale of Air India in March 2020.
Ambani’s Expression of Interest in April 2019
In April, two sources close to the development said that Reliance Industries was exploring an investment in Air India.
However, Reliance did not file an official Expression of Interest (EoI) for Jet Airways. A Reliance Industries spokesperson had refused to comment but said that the company “evaluates various opportunities on an ongoing basis”
An anonymous source had said in April that interest in Air India was a part of Reliance’s overall plan.
Another anonymous source had told The Indian Express that interest in Air India was a part of Reliance’s overall plan, “It is a boardroom strategy and could be considered at a later stage. Discussions are slowly picking pace since the interested parties are of the view they still have time.”
We tried to contact Reliance Industries for a comment but could not verify the interest.
Sale likely by April, Expression of Interest as early as December 15
Finance Minister Nirmala Sitharaman had stated in early November that while the government was moving on both (Air India and Bharat Petroleum Corporation Limited) expecting to close their sale in a year, “the ground realities will play out”. Sitharaman had also said that interest among investors was high with regard to Air India.
Furthermore, ministry sources say that the Air India management and employee unions have come forward with “a bunch of proposals” ahead of the sale. As per recent reports, the Ministry of Civil Aviation is likely to call for an Expression of Interest as early as December 15.
FM Sitharaman had said that interest among investors was high. A potential call for Expression of Interest could come as early as December 15.
The proposal shall include employee medical facilities, pilot arrears, a two-year lock-in period guarantee, and also a continued complementary ticket scheme for Air India employees. Earlier the BJP government had sought to sell 26 percent stake in Air India in 2018. However, the response from investors was underwhelming.
Last Chance of Air India
When the March 2018 disinvestment bid failed, a Finance Minister Arun Jaitley-led high-level panel had postponed a strategic plan for the sale of the 76 percent government holding in Air India. The government has decided to reduce the national carrier’s financial stress, exclude $7 billion of debt, to lure in buyers. Air India’s current debt stands at $11 billion.
The government will reportedly exclude $7 billion of Air India’s current $11 billion debt to lure in buyers.
Moreover, selling Air India will help BJP plug the widening fiscal gap a little. Air India has been a loss-making machine after it merged with Indian Airlines in 2007. As per the latest reports, the plan to sell the entire government stake is approved by a ministerial panel.
In other news, responding to a pilot’s petition seeking outstanding salary, the National Company Law Tribunal has sent out a notice asking Air India “why bankruptcy proceedings shouldn’t be initiated” against the debt-laden airline.
Other potential buyers also in the mix are Tata Sons and Etihad Airways (which sent feelers to Anil Ambani).
Apart from Mukesh Ambani-led Reliance, Tata Sons and Etihad Airways are also expected to be in the mix of Air India Sale. Tata Sons board has already indulged in a “couple of discussions” for a potential acquisition. Similarly, Etihad is scouting for a consortium of partners as it eyes the government’s 76% stake in Air India. The Gulf airline is also in touch with the Anil Ambani group as potential partners in the deal.