The government has invited bids for the disinvestment process of the state-owned national carrier Air India. In the preliminary information memorandum about the divestment process, government has invited Expressions of Interest for sale of 76 per cent stake in Air India as well as the transfer of management control.
The Civil Aviation Ministry has asked for Expression of Interest (EoI) for selling its shares in the debt-laden carrier and two of its subsidiaries. The memorandum also invited bids for sale of 50 percent shares India holds in Air India SATS Airport Services. It is a joint venture between the debt-laden Indian carrier and Singapore Airport Terminal Services. The divestment process will also include Air India Express, the completely-owned international arm of Air India. Interested bidders could furnish expressions of interest by May 14.
Professional services firm Ernst & Young LLP India has been appointed as transaction adviser for the strategic disinvestment process. As per the memorandum, Air India management or employees can either participate directly in the bidding process or form a consortium to do so. The disinvestment process will be completed by competitive bidding, which is expected to be over by December this year.
The national carrier is staying afloat on taxpayers' money under the bailout package approved by the previous UPA government in 2012. As of now, Air India has a total debt of Rs 52,000 crore to its name, out of which, Rs 33,000 crore is due to working capital loans. This figure is expected to rise by another Rs 3,500 crore by the end of this financial year.
The entity that acquires Air India will bear less than half out of the total debt borne by Air India. All non-core assets, like offices, furniture and the kind, will become part of the special purpose vehicle instead of being sold.
The government has stipulated that entities planning to participate in the Air India disinvestment process should have a minimum aggregate net worth of Rs 5,000 crore. Domestic airlines with zero or negative net worth can participate in the bidding process by forming consortiums which fulfill the prescribed criteria. The minimum net criteria for companies and consortiums has been laid down to keep non-serious and fly-by-night operators away from the bidding process.
In June 2017, the Cabinet Committee on Economic Affairs (CCEA) gave in-principle nod to the strategic disinvestment of the airline, which has a debt burden of over Rs 50,000 crore. Subsequent to the decision, the Air India Specific Alternative Mechanism (AISAM), headed by Finance Minister Arun Jaitley, was set up to decide on specific issues.
Tata Group, which once owned Air India, could reportedly go with Singapore Airlines to bid for Air India. Singapore Airlines in partnership with the salt-to-steel conglomerate operates Vistara Airlines. Talking to Business Today recently, Singapore Airlines' India general manager David Lim said that they are keeping an open mind on the deal. Jet Airways may also go with Air France-KLM to participate in the Air India disinvestment.