India’s new government will once again aim to sell off national flag carrier Air India, but this time it hopes to offer a more attractive proposition.
Last year’s attempt turned out to be fruitless with not a single bid posted, due to the government’s insistence on retaining a quarter share and the requirement of bidders to take on its huge debt.
The government has announced a two-phase bidding process that offers bidders 100% of the airline with a much reduced debt burden.
More than half of AI’s current debt will be transferred to a separate holding company.
It is seeking expressions of interest by July 7.
"Besides offering 100% stake to private investors, more loans of the airline would be transferred to the special purpose vehicle (SPV) to sweeten the deal," said a senior government official.
Some non-core assets of Air India will also be transferred out and possibly sold off separately.
While there is still substantial debt to take on for any potential bidders, and a bloated workforce to pay for, it arguably has more chance of success this time round.
Firstly, the Indian rupee has stabilised against the dollar, and the demise of Jet Airways now means Air India faces little competition in the full-service market.
The only other domestic full-service carrier is the much smaller Vistara.
