Interest among global airlines likely in Air India divestment: CAPA

Our Bureau New Delhi | Updated on July 31, 2019 Published on July 31, 2019

Air India divestment process is expected to begin after the results are finalised   -  The Hindu

Aviation advisory expects govt to fast track divestment process

Interest among global airlines in the upcoming divestment of Air India is likely to be strong this time, the Centre for Asia Pacific Aviation (CAPA) said on Wednesday.

In a statement, CAPA said that it does “not rule out the possibility of some leading carriers including those from the Gulf participating in the tender in a joint venture with large Indian conglomerates.”

The aviation advisory, however, cautions that the current global and national economic environment and geo-political instability may have some impact on investor sentiment. “However, the outlook for the performance of Indian carriers remains,” it adds.

CAPA expects that Air India's privatisation process will be fast-tracked, but cautions that if serious bidders are to be attracted, they should be given sufficient time to conduct appropriate due diligence. “Assuming that the tender is launched in August, it should be feasible to select the successful bidder by December-end,” the report says.

The proposed privatisation process cannot start till Air India’s accounts for fiscal 2018-19 are finalised. While the government had asked Air India to finalise the results by June-end, the airline is yet to finalise its financials. Sources say that some audits were on to finalise the financials though it is not clear how long this will take.

It is expected that the divestment process will begin about a fortnight after the results are finalised.

The aviation advisory has maintained for long that the Indian market can only sustain two full service carriers, and that the operations of three such airlines – Air India, Jet Airways and Vistara – were not sustainable. “The suspension of operations by Jet Airways since April this year has removed the largest full service competitor to Air India, increasing the chances of a successful divestment this time around. Nevertheless, bidders will be conscious of the possibility – although remote – of the revival of Jet Airways,” it adds.

CAPA feels that the divestment process has the potential to be a distraction for Air India executives. “It is critical that the Ministry allows Air India’s senior management to remain focussed on optimising the carrier’s commercial, operational and financial performance. A separate team may need to be established to handle divestment,” the report says.

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Published on July 31, 2019
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