As buyers shy away, govt may sweeten Air India deal
The Indian government may assume additional liabilities of close to US$535 million to enthuse suitors to buy the ailing state-owned airline
With the Indian government’s bid to sell its loss-making state-owned carrier Air India finding no takers, it is now looking at ways to sweeten the deal to help the sale take off.
The government may assume additional liabilities of close to 35 billion rupees (US$535 million). This is proposed to be done by assuming employee liabilities of 12.98 billion rupees and contingent liabilities of 22 billion rupees, the Financial Express reports.
According to the preliminary information memorandum (PIM), the buyer must acquire liabilities and debt to the tune of 333.92 billion rupees; the total borrowings of the national carrier were approximately 514 billion rupees as of March 2017.
By sweetening the deal, the government hopes to be able to persuade prospective buyers to take over the airline, which is a huge drain on the country’s exchequer.
Since the Indian government released the expression of interest (EoI) document for Air India’s privatization on March 28, major contenders have dropped out of the race, discouraged by the existing terms and conditions.
The government plans to sell a 76% stake in Air India along with a 100% stake in low-cost international carrier Air India Express Ltd and 50% in Air India SATS Airport Services Pvt Ltd, a joint venture with Singapore-based SATS. However, it will not sell individual arms or operations of the airline separately, and this has acted as a dampener.
In rapid succession, InterGlobe Aviation, which runs IndiGo, Jet Airways (India) and the Tata Group stepped out of the race. Another possible suitor, SpiceJet, is still in the fray but its chairman Ajay Singh said recently that his airline was too small to bid for Air India.
While IndiGo indicated that it might have been interested only in the international operations of Air India, Jet Airways has said that after reviewing the terms on offer, it will not participate in the bidding process.
Meanwhile Air India employee unions, which are opposed to privatizing the airline, have accused the probable bidders of using “arm-twisting tactics” to force the government to sell the national carrier on the cheap. They said they would take up the issue with the Civil Aviation Ministry.