Earlier this year in June, the Government of India decided to disinvest in the country’s national carrier, Air India. Since then, a group of ministers, headed by finance minister Arun Jaitley, has been working out details on how to take this forward.
There are two options that are currently being considered — the first includes selling off the airline’s subsidiaries before the final sale of Air India; and the second option is to sell the airline on an “as-is-where-is” basis. The latter is a legal term that means the buyer purchases the item on sale in whatever condition it is in and with whatever liabilities it may have attached to it.
Currently, Air India has a debt of about ₹52,000 crore. Its assets are worth ₹30,000 crore and include engineering items, property, a few art pieces and subsidiary businesses. In July, the airline announced that out of its six subsidiaries, three are most likely to show profits by the end of the fiscal year. These are Air India Express, a budget short-haul service; AISATS is the ground and cargo handling unit; and Air India Air Transport Services. The other subsidiaries are Alliance Air that is part of the government’s Regional Connectivity Scheme; Hotel Corporation of India; and Air India Engineering Services that is an aircraft maintenance facility.
Further, an updated version of the country’s foreign direct investment (FDI) document released yesterday restricts Air India from being sold to a 100 per cent foreign company/airline. It can, however, be sold to a joint venture wherein one partner company is registered in India and has a minimum shareholding of 51 per cent.
This opens doors for Tata-SIA airline, Vistara, and Tata’s other joint venture, Air Asia India to bid for Air India. If rumours are to be believed, Tata Group has been eyeing Air India. Should it acquire the airline, it would complete a historic circle. Air India was formed by JRD Tata in 1932 when it was known as Tata Airlines. In 1946 it became a public limited company under the name of Air India.
On the other hand, the only airline to openly show interest in Air India’s international operations is the low cost carrier, IndiGo. Last month, in an internal discussion on IndiGo’s future plans regarding long-haul international flying — Business Traveller India has a copy of its transcript — Rahul Bhatia, co-founder of IndiGo says: “Quite simply, we are interested in the airline operations of Air India. And more specifically, we are focused narrowly on Air India’s international operations and Air India Express. That is what we have communicated in our one-on-one discussions with Government officials.”
“Today, IndiGo serves seven international destinations and Air India’s international operations would bring a very important element to our network. It would provide rapid entry into restricted and, in some cases, closed international markets. So instead of being a small international player, IndiGo would have a path to becoming a major player in the international market. Importantly, we believe that IndiGo has the ingredients to significantly grow and unleash the true growth and earnings potential of Air India’s international operations.”