The new owners, if any are found, will get planes and a 76% stake in the struggling flag carrier.
Air India is officially up for grabs. Together with its aircraft and a 76% stake in the struggling flag carrier, the new owners will also be saddled with $5 billion of the airline’s debt. The plan is a little different to earlier reports of a sale.
The airline is about $7.8 billion in debt in total, and the controlling stake would come with two-thirds of it. It would be the country’s most high-profile asset sale in decades, Bloomberg reports.
Also in the offer is a complete sale of the airline’s overseas budget carrier Air India Express. A 50% stake in a ground handling unit will be sold separately.
The move is a gamble for Prime Minister Narendra Modi – a test case for him to be seen as a reformist and privatiser. A Star Alliance airline with five subsidiaries, a joint venture and a workforce of 27,000, Air India is currently surviving on taxpayer-funded bailouts.
“Selling a 76% stake is the second-best option for the government; the best option would have been to exit completely,” Kapil Kaul, South Asia CEO at CAPA Centre for Aviation, tells Bloomberg.
“There’s also a caveat there that the acquirer will have to list the company, which means the government is looking at exiting through an IPO route, which is fair enough and very positive.”
Loss-making since 2007, Air India made an operating profit of 3 billion rupees (€37 million) in the financial year to March 2017 but posted a net loss of 57.7 billion rupees.
IndiGo, India’s biggest airline, is the only company to so far publicly express a desire to buy Air India’s airline operations, a lucrative business with airport slots around the world, plus bilateral rights to launch flights to many countries.
Singapore Airlines and India’s Tata Group, which run the Indian airline Vistara, have said they will also take a look at the sale.