Friday, October 13, 2017

‘Allow foreign airlines to bid for Air India’

An aviation consultancy firm has said the government should allow foreign airlines to participate in bidding for Air India as no major Indian company will invest in such a complex project without an experienced strategic partner.

CAPA India-Centre for Aviation in its report has said allowing foreign airlines to participate will increase the number of bidders and the valuation. The consultancy firm also said the balance sheet of the airline should be cleaned up as, in its current form, it can never be a viable business proposition because of its massive debt and interest burden.

Also, the entire 100 per cent equity should be sold off as any level of equity retention will deter investors because of concerns over the prospect of continued government interference post-privatisation.

The core divestment should consist of the airline operations only, namely Air India, Air India Express and optionally Air India Regional. They should be sold along with aircraft-related debt and reasonable working capital loans.

Special business units such as MRO (Air India Engineering), catering (TAjSATS), ground handling (both Air India Air Transport Services and AISATS) and Centaur Hotels should be sold off separately to raise capital that can be used to retire debt. Property and other non-core assets should be placed in a separate special purpose vehicle. The new investors should have reasonable flexibility to take commercial decisions on employee numbers and productivity over time, particularly for non-core roles, ideally by not replacing retirements. Similarly, with the retention of the Air India brand, the government should be open to discussions.
12/10/17 Business Line