Friday, May 11, 2018

Debt-laden Air India is up for grabs but potential bidders blow hot and cold

The Indian government’s ambitious plan to privatize debt-laden Air India has run into rough weather with no takers in sight. And with unionized employees as well as political parties kicking up dust, and experts warning against any further delay in finding a suitor, chances are the 86-year-old airline may fall flat after the May 31 deadline.

Desperate to meet its Rs 800-billion divestment target in the current financial year beginning April 2018, the Narendra Modi administration on March 28 offered to sell 76 percent of its equity stake in the bankrupt national carrier, along with its profit-making low-cost arm, Air India Express, and its ground-handling subsidiary, AISATS, an equal joint venture between Air India and Singapore-based SATS.

But even after diluting its terms and extending the bidding deadline from May 14 to May 31, the stake sale has drawn a blank, thanks mainly to two sticking points concerning the huge debt and the bloated staff strength of the famed airline once called the ‘Maharaja of the skies’ but now being kept afloat with taxpayers’ money. 

With a fleet of 130 aircraft and boasting 2,800 international prime-time slots per week in 39 destinations (including Dubai, Sharjah and Abu Dhabi) and 4,000 domestic slots in 54 destinations, Air India, of course, has been making operating profits for the past three years.

But the flagship carrier bleeds Rs 5 billion every year and has amassed a debt in excess of Rs 50 billion, of which Rs 33 billion will have to be borne by the bid winner. No wonder, domestic and foreign airlines which first jumped on the bandwagon to buy the former ‘jewel on the crown’ later backed off.
11/05/18 Mahesh Trivedi/Al Arabiya