Has everybody given up on the Air India stake sale?

Can Air India get a good offer?
Can Air India get a good offer?
Image: Reuters/Regis Duvignau
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A week before the deadline to place the initial bids for Air India ends, there’s not a single offer on the table yet. And the Narendra Modi government’s defensive reaction to this makes one wonder if there will be any suitors at all.

“The government retains the right to sell or not to sell Air India if the bid price is found to be inadequate,” civil aviation secretary RN Choubey reportedly said on May 22.

While the airline has piled up losses over the years, the question of its sale had been a political hot potato.

And having risked considerable political capital—the government beat many odds to put up 76% of its stake in Air India up for sale—this uncertainty in the government’s tone is a worrying sign.

Shaky start

The proposed sale was shaky right from the start. All three major domestic airlines, Jet Airways, IndiGo, and SpiceJet, had ruled themselves out of the race right within days of the government’s formal announcement of the stake sale on March 28.

The offer wasn’t enticing enough. “We welcome the government move to privatise Air India. It is a bold step. However, considering the terms of offer in the information memorandum and based on our review, we are not participating in the process,” Amit Agarwal, Jet Airways’ deputy CEO, told the Press Trust of India on April 10. However, on May 18, chairman Naresh Goyal said he will continue to look at Air India, though the focus will remain on his own business.

The Tata Group is the only potential bidder showing some serious interest, short of placing a bid.

On the other hand, a handful of foreign players have seemed more keen. However, neither the law nor the political climate will allow a foreign player to buy the entire stake. “Give Air India to someone who can run it well, but the entity must be an Indian. India must not cede control over its skies,” Mohan Bhagwat, the chief of the Rashtriya Swayamsewak Sangh (RSS), said on April 16. The RSS is the ideological parent of the ruling Bharatiya Janata Party (BJP) government.

In short, any interested foreign airline must partner with an Indian peer to bid for the Maharajah. And the only Indian player in the fray at this point is the Tata Group.

To expect a tempting offer when there is only one bidder may be too high a hope. Add Choubey’s comments to the mix, and it appears that Air India’s disinvestment process has hit a bit of an air pocket. The other option before the government is to sweeten the terms of the sale. That, too, is under consideration, as Quartz reported last month.