Analysts and Industry watchers said that the while the Government should consider divesting its stake in Air India (AI), proceeding with the idea at this point in time will not be a wise decision.

The experts spoke to BusinessLine , a day after the Centre had announced that the last date for submission of Expression of Interest (EOI) in the State-owned carrier was being extended by two months to June 30.

When the divestment process had begun, towards the end of January 2020, senior Government officials indicated that they were hopeful of identifying a new owner for AI by June or July this year. But the recent extension implies that the timelines for finding a new owner for the national carrier will have to be re-drawn due to the impact of the coronavirus pandemic on the economy at large.

Lewis Burroughs, Head Aviation, India ICF is clear that AI’s sale is in the best interests of the company, the Indian taxpayers and the aviation industry. “It is a question of when and not if,” Burroughs said, adding that the Government should focus on getting as competitive a price as it can for the Indian taxpayers.

“This means structuring the deal to appeal to as many bidders as possible, which considering the current lockdown and likely economic impact to come, will be a challenge,” he pointed out.

An industry watcher who declined to be named said that the big draw that AI has for any investor is its international flying rights. “International operations are not going to open up anytime soon and therefore the price discovery will be very shallow,” he said.

Pointing out that the current cataclysmic tailspin of the economy and the aviation sector has made it an even steeper gradient for airlines to climb, Sanjay Viswanathan, Chairman AdiGroup, said that the Government should wait till the economy returns to normalcy and then divest its share in AI through an IPO.

The idea of an IPO for AI has more takers. An analyst, who declined to be named, felt that the Government should make plans for having an IPO sometime next year when the conditions are favourable. Following the IPO, the control of the airline can be handed over to the public at large, with a professionally managed board. Incidentally, this was the strategy that the Margaret Thatcher government had implemented for the British Airways way back in 1987 when it divested it shares in the airlines.

According to Burroughs, AI is a financial burden on the State and its competitive position is unlikely to improve over the near-term which may result in greater financial support from the Government.

“The Government has a hard choice to make and timing the market right will be crucial to getting the best deal possible. Time it too soon and expect disappointing offers, time it too late, and expect further State fund injections which could have been utilised elsewhere,” he said.

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