Government offers to sell 76% stake in Air India to private bidders

NEW DELHI: Sixty-five years after Tata Group-founded Air India (AI) was nationalised, the government on Wednesday offered to sell 76% stake in AI to private bidders and effectively exit the airline business. Of AI’s total debt of Rs 50,000 crore, bidders for airline arm — AI, AI Express and AI-SATS (airport service company) — will have to take over debt of Rs 24,576 crore and liabilities of Rs 8,816 crore. The airline arm is being offered for sale first. TOI had first reported on March 6 that divestment of AI will begin with the airline arm being hived off first.


The iconic Nariman Point headquarters will not be associated with the “new AI” and only the central Delhi HQ at

Airlines House

will be given to the successful bidder to use for “two years or more”, while the ownership will remain with the government. Among “core real estate”, the bidder will get 21.8 acres hangar space at Delhi and Mumbai airports, said senior officials.

According to the preliminary information memorandum (PIM) issued on Wednesday, bidders need to have a minimum net worth of Rs 5,000 crore. Indian carriers with negative net worth, including all except IndiGo, will be considered to have zero net worth and can bid for the Maharaja, if they tie up with someone that can take the combined net worth to the required amount. This paves the way for an Indian carrier to tie up with a strong international player. Tata Sons-Singapore Airlines, IndiGo and an unidentified foreign player have already expressed interest in AI. Jet Airways was also waiting for the bid documents to decide on its next move and

Qatar Airways

wants to start an airline in India. They may also join the fray.

The successful bidder, expected to be finalised by September-end, will have to retain AI brand name for a specific period, which will be spelt out in the request for proposal. But a condition that AI has to be run on an “arm’s length basis” for at least three years, when it cannot be merged with any other entity and would need to maintain its identity as a separate airline, effectively means that the brand will have to be retained for at least that long.

The employees will need to be retained for at least a year. The government will carve out Esops from the 24% equity it will keep. Employees have also been allowed to participate in the bidding process, either directly or by creating a consortium.

The ground handling unit, engineering division and Alliance Air will also be offered for sale and bidders will also have to take over some amount of debt. An SPV — AI Asset Holding — is being created to transfer the remaining unsustainable debt, non core real estate and art collection.

Singapore Airlines

, which is seen as a strong potential bidder, said in a statement: “Our priority is the further expansion of Vistara (Its JV with

Tatas

). However, we will keep our options open with respect to the proposed divestment of Air India.”

Kapil Kaul, India head of CAPA, said: “The expression of interest (EoI) details are largely aligned to investor interest as expected. We see significant interest in AI’s divestment. Divesting 76% is the second best option. CAPA preferred 100% divestment as we think retaining 24% may potentially dilute interest. I don’t see any more deal breakers in this EoI except, perhaps, keeping significantly higher than expected non-aircraft debt on AI’s books. We are positively surprised with only one year staff retention condition, especially in the election year. However, meeting December-end divestment deadline may be challenging.”

The Opposition is up in arms. West Bengal CM Mamata Banerjee tweeted: “I am sorry to read in the media about the govt inviting expression of interest for selling Air India, the jewel of our nation. We strongly oppose this and want this order to be withdrawn immediately. This government must not be allowed to sell our country.”