The sale of India’s national airline has got off to a stuttering start and the next 10 days will be key to its success.
A week after the government formally put up 76% of Air India (AI) for sale—including 100% in AI Express and 50% in Air India SATS—India’s largest carrier, IndiGo, has pulled out of the race, admitting that it isn’t up to the game.
“We do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” Aditya Ghosh, president of IndiGo’s parent company, InterGlobe Aviation, said in a statement on April 05. “From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express.”
Air India’s debt of around Rs33,400 crore (over $5 billion) and the prospect of having to buy its loss-making domestic operations alongside two of its profitable entities may have put off some potential buyers, said Mark Martin, head of aviation consulting firm, Martin Consulting.
“Some players that expressed interest in Air India were out to scavenge for a piece or two of the group. I don’t think there was anyone who was that focused on buying Air India as a whole, and performing the selfless task of turning the airline around. They were hoping Air India will go in bits and pieces,” Martin said.
So is the government now concerned about not getting enough bidders?
“Firstly, the sale document was not made just for IndiGo. We have made the best deal possible given what we are selling. Our approach right now is to see what the demand is like. There’s a fair amount of flexibility built into the process,” a government official involved in the sale process told Quartz.
The next 10 days should give the government a sense of the demand as interested buyers are going to send in their queries, the official said.
“We have the procedure in place. If there are multiple bidders, we go ahead with it. If there’s only one bidder, the civil aviation ministry will take a call on that. If there are no buyers, we will have to see what we can do,” the official said. So, if the response is unsatisfactory, the government may consider rejigging what’s on offer to ensure the sale goes through, the official explained.
For now, it’s wait-and-watch.
Martin, meanwhile, believes there is enough demand for AI.
“I see focused players coming into the game who genuinely believe in reviving Air India. The Tata group should still be keen on it and possibly, some European carriers…or larger conglomerates with participants like Qatar Airways and Air France,” Martin said.