Economy

Govt to divest 76% stake in Air India, Air India Express

Ashwini Phadnis New Delhi | Updated on March 27, 2018 Published on March 27, 2018

Also wants to sell 50% in AISATS; the exercise will begin in the next few days

The government has decided to retain a 24 per cent stake in Air India and Air India Express, as part of its divestment in the state-owned airline. The government is also proposing divesting 50 per cent of its stake in Air India Sats Airport Services. The divestment is to be carried out through an open competitive bidding process.

The divestment process is expected to get under way in the next few days when the global invitation for Expression of Interest (EoI) is uploaded on the government’s websites. A clearer picture of the broad guidelines will emerge once this is done.

The government is proposing a strategic divestment of the airline by transferring management control and sale of 76 per cent of its equity share capital in Air India. Ernst and Young is the transaction advisor to the government on the divestment process.

The government has stipulated a net worth criterion of ₹5,000 crore for parties interested in bidding for Air India.

Finance Minister Arun Jaitley, in his Budget speech, had said that the government had initiated the process of strategic divestment in 24 CPSEs, which included the strategic privatisation of Air India.

The divestment of Air India evoked interest even before it got under way with IndiGo submitting an unsolicited EoI in Air India, soon after the government announcement was made.

Turkish company Celebi has also shown interest in bidding for the airline’s ground-handling activities, and Gulf based low-cost airline, Air Arabia, has indicated that Air India Express is a good option for it to bid for.

The Centre for Asia Pacific Aviation (CAPA) had, as early as January this year, said that up to four Indian carriers — Jet Airways, IndiGo, SpiceJet and Vistara — and one or two non-airline companies could be interested in the opportunity that a stake in Air India has to offer.

Besides, the Air France-KLM combine is also said to be keen on tying up with Jet Airways to form a consortium to bid for the state-owned airline.

However, interested bidders have made it clear that they will require clarity on a number of issues, including what will happen to Air India’s current workforce.

Celebi officials indicated that they needed clarity on at least three issues — how the company will be structured, the future value in tenure that the company delivers, and the future of Air India’s employees.

“Today, Air India has grandfather rights at all the airports but for how long is that (going to be)? The company (AITSL) enjoys the base of Air India as it is an assured business but whom Air India gets sold to is not known,” said Murali Ramachandran, CEO, Celebi Aviation India. “All these things need to be addressed as a responsible investor,” he added.

Published on March 27, 2018

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