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COVID-19: Air India suitors get a bargaining chip

The last date for submitting initial bids for Air India has been extended to October 30, fourth since the request for qualification (RFQ) was issued in January

Nirbhay Kumar | September 7, 2020 | Updated 23:32 IST
COVID-19: Air India suitors get a bargaining chip
Tata Group seen as frontrunner for Air India

KEY HIGHLIGHTS

  • Air India's April-June quarter loss stands at Rs 2,500 crore as pandemic continued its rampage
  • Aviation experts said prevailing situation offers prospective buyers of Air India more bargaining power
  • Tata Group is being seen as the front-runner for the disinvestment-bound airline
  • Aviation consultancy CAPA in a recent report said that Indian carriers are headed for an unprecedented consolidated loss of $4.0-4.5 billion in FY21

Gradual opening of the skies helped flag carrier Air India cut monthly losses but April-June quarter losses swelled to Rs 2,500 crore as the pandemic continued to take a heavy toll on the aviation sector.

"The net loss before tax was about Rs 2,500 crore in the first quarter of the current financial year," an official source said. While mounting losses put additional burden on the government, the prevailing situation offers prospective buyers more bargaining power.

Tata Group is being seen as the front-runner for the disinvestment-bound airline. The last date for submitting initial bids for Air India has been extended to October 30, fourth since the request for qualification (RFQ) was issued in January.

"The current situation offers much more bargaining power to the prospective buyers. I think Tatas would be the most serious buyer given their interest in aviation and also their awareness that there is long-term high potential of Indian aviation," said Rajan Mehra, ClubOne Air CEO and former India head of Qatar Airways.

Ankur Bhatia, Executive Director of travel and hospitality major Bird Group also feels that prospective bidders have chances of getting a better deal in the current business environment, and also with the government being hell-bent to sell the national carrier.

According to official sources, Air India had total revenue of about Rs 1,600 crore while total expenses stood at Rs 4,130 crore. An Air India spokesperson declined to confirm the financial numbers. "We would not like to comment on such internal issues," the spokesperson said in an email response.

Aviation has been one of the worst-affected sectors from coronavirus pandemic and the future outlook appears to be equally bleak. All private players have been heavily bleeding due to lockdown and subsequent slump in demand for air travel. The capacity has also been restricted in the wake of rising infections in the country.

InterGlobe Aviation-run IndiGo reported its highest-ever loss of Rs 2,844 crore in the April-June quarter of FY21. Another listed carrier SpiceJet is yet to declare its quarterly financial results.

Aviation consultancy Centre for Asia Pacific Aviation (CAPA) in a recent report said that Indian carriers are headed for an unprecedented consolidated loss of $4.0-4.5 billion in FY2021.

"Continuing uncertainty with respect to state-by-state quarantine restrictions and the persistent shadow of the possibility of new lockdowns, exacerbates underlying demand risks. Limited hotel capacity and surface transport options further deter travel," CAPA noted.

Also read: Tata Group may bid for Air India by end of month; initiates due diligence

Also read: Coronavirus effect: Air India sacks 48 pilots overnight

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