Friday, March 13, 2020

Air India sale: Why the government should call it off, for now

The government may have extended the timeline to sell Air India. But clearly, this may not be the right time to sell the national airline.

Ask those who have done mega deals, and they will tell that sometimes, timing can be everything in an acquisition.
One could start by asking the Tata Steel management.

The steelmaker has been struggling with its ambitious acquisition of Corus in 2007, and the $13 billion deal remains India's biggest. It was done when the commodity cycle was near its peak, but soon afterwards there was a meltdown from 2008 on wards.
In the aviation industry itself there are at least two promoters who would have wished they hadn't done the acquisitions that they did.
Jet Airways founder Naresh Goyal acquired  Air Sahara in 2007, for Rs 1,450 crore. It was an expensive deal, but it was a price that Goyal was eager to pay to keep a rising competition - Vijay Mallya and his Kingfisher Airlines - at bay.
Air Sahara was a loss-making airline to start with. Goyal tried turning it around by rechristening it JetLite, the low cost arm of Jet Airways. Despite the airline veteran's ambitions, JetLite remained small with a fleet of less than 10 aircraft. It losses widened to over Rs 300 crore in 2018.
Air Sahara was one big reason why Jet Airways debt mountain kept growing, eventually leading to its downfall in April 2019.
Ironically, Kingfisher too couldn't survive after an expensive acquisition, this time of Air Deccan in 2007. Both these acquisitions were followed by the global slowdown.
13/03/20 Prince Mathews Thomas/moneycontrol
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