Air India sale: Third time lucky?

New owner will get 1,500 highly trained pilots, over 2,000 trained engineers and slots in airports around the globe

State-owned airline Air India runs the best chance of finally moving out of the government's hands. On September 15 evening, Tuhin Pandey, Secretary, DIPAM, tweeted, "Financial bids for Air India divestment received by Transaction Adviser. The process now moves to the concluding stage."

Shortly after the tweet, Tata Sons confirmed that it had bid for the Maharaja. Sources also indicated that SpiceJet's promoter Ajay Singh too, had bid.

After two unsuccessful attempts at divesting the Maharaja, the government has made the terms more favourable for the bidders. The government is selling 100 per cent of its equity share capital in the state-owned airline, including Air India's shareholding interest of 100 per cent in AI Express Limited and 50 per cent in Air India SATS Airport Services Private Limited.

Air India's divestment process started in December 2020 with the Expression of Interest being called from prospective bidders. The government has since then been taking steps to ensure that this divestment process is successful.

In October last year, the government decided not to predetermine Air India's debt levels and leave it to the market to determine as these were uncertain times due to the Covid-19 pandemic. Apart from the market-determined price that the two bidders have quoted, they will have to provide 15 per cent of that value as cash.

Read | Financial bids received for Air India disinvestment; Tatas among suitors

Earlier this month, the Central Board of Direct Taxes (CBDT) said that the buyer of a state-run company could carry forward losses of the erstwhile state-owned company and claim up to 30 per cent tax rebate annually.

In another move to encourage buyers, this time around, the new owner only needs to pick up all aircraft-related debt, including normal working capital debt. In contrast, the debt relating to excess working capital and some debt guaranteed by the government has been transferred to a special purpose vehicle (SPV) set up a few years ago.

In February 2021, the civil aviation minister had informed Rajya Sabha that national carrier Air India's total debt as per provisional figures for 2019-20 (April-March) was Rs 38,366.39 crore after transfer of debt amounting to Rs 22,064 crore to an SPV.

Air India is an attractive buy this time around as the new owner will get about 1,500 highly trained pilots capable of flying the Airbus 320 aircraft, which criss-cross the country and fly to neighbouring countries. The new owner will also get pilots who can fly the bigger Boeing 777 and 787 aircraft, which are currently doing non-stop flights between India and the US, Canada, Australia, UK, Germany and other parts of Europe. The new owner will also get over 2,000 trained engineers to look after the fleet, which in May this year stood at 173 aircraft, including 13 Boeing 777-300 Extended Range, three Boeing 777-200 Long Range, 27 Boeing 787-800 and 27 Airbus 321-New Engine Option aircraft.

Another plus for Air India's new owner will be the slots that the airline has in airports around the globe, including in New York, Chicago, London, Narita (in Japan) and Seoul. In Mumbai itself, the airline has 18-morning departure slots. A slot is defined as the scheduled time of arrival or departure made available at an airport to an airline for operating regular flights.

The new owner will thus get an airline that started in 1932, which set the benchmark for other global airlines and sound marketing in many foreign countries to which the airline operates.

Given this situation, it will most likely be the third time lucky for both Air India and the government when divesting the Maharaja.

In 2001, the Vajpayee government attempted to sell Air India, then primarily operating only international flights. The Tatas and Singapore Airlines formed a consortium, but the consortium eventually pulled out with things moving at a snail's pace. Initially, the Hinduja Group was also in the fray at that time. The entire process was called off for various reasons, including the terror attacks in the United States on September 11, 2001.

In 2017 the Modi government again unsuccessfully attempted to sell Air India, and it had by then been merged and was a combination of domestic and international routes. Still, no bids were received as the market was said to be lukewarm to the idea of owning only 76 per cent of Air India's stake that was on offer.

This time around, if the Tatas successfully win the bid for Air India, it will be a sweet victory for the group. The original Air India was set up by JRD Tata, who launched Air India international when known international carriers like KLM, Air France and Imperial Airways were dominant players on the India-UK route. In 1948, a brand new Lockheed Constellation L-749 made its first Mumbai-Geneva-London flight, flying in Air India International's colours.

(The writer is a journalist)