Maharaja disappointed; Modi government to view the deal

Air India has been put up for sale, only to be disappointed with the results. No one was interested in buying the carrier.

The Center has been trying to sell off the flight carrier last year, only to be met with dead ends at every corner.

“As informed by the transaction adviser, no response has been received for the expression of interest (EoI) floated for the strategic disinvestment of AI. Further course of action will be decided appropriately,” the aviation ministry tweeted after 5 pm, the deadline for submissions.

MODI GOVERNMENT TO LOOK INTO DEAL

Prime Minister Narendra Modi’s government will review plans to sell Air India after his administration’s most high-profile privatization offer ended in a whimper with no buyers showing interest in the unprofitable flag carrier. 

The government will make changes to the plan if needed, Economic Affairs Secretary Subhash Chandra Garg said. As the deadline to show preliminary interest expired Thursday, no bidder came forward to propose purchasing 76% of Air India Ltd., which was offered along with $5 billion debt, Aviation Secretary R.N. Choubey told reporters in New Delhi. The process for the next steps will start in two weeks, he said. 

“We were certainly looking forward to better participation than this,” he said. 

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The failure is a setback to Modi’s reformist image ahead of national elections due next year. In the past two decades, Air India lost out to carriers such as Singapore Airlines Ltd. and Emirates that expanded flights to India, the world’s fastest-growing major aviation market. The lack of interest also means the government is stuck with an enterprise that has survived on taxpayer money for the past decade. 

Since the government was reluctant to sell Air India in parts, IndiGo had pulled out of the deal in April this year. Some media had reported that Singapore Air, Qatar Airways and conglomerate Tata Group were potential bidders, but in the end, none showed up. 

Air India’s fleet includes more than 100 Boeing Co. and Airbus SE aircraft that make more than 2,300 local flights weekly to 54 airports. It has 2,543 landing slots at airports including New York, London, Paris and Tokyo. 

WHY HAS IT BECOME DIFFICULT TO SELL?

India’s government had tried to sell the carrier previously as well and those efforts were stopped after political opposition. 

The other key issues troubling investors are — the fate of AI’s 27,000-strong workforce; Rs 50,000-crore debt-cum-losses; government offering 76% in the airline and retaining the balance. The bidder was expected to take on Rs 33,392 crore of this debt under the terms of sale that had no takers.

Not to mention the constant fluctuations in the fuel price.  With no signs of a correction anytime soon, airline stocks have fallen.

According to news reports, the higher costs are resulting in a crunch—a domestic airline has delayed salary payments, while another is raising tariffs to make ends meet. Needless to say, higher tariffs will hit load factors or capacity utilization. In such a backdrop, the last thing on anyone’s mind would be to add significant capacity by making a large acquisition. To that extent, the sale was ill-timed.