Mumbai: Barely a fortnight after the government released the expression of interest (EoI) document for Air India privatisation, uncertainty looms over the sale with most of the major contenders dropping out of the race citing the existing terms and conditions.

In rapid succession, InterGlobe Aviation Ltd that runs IndiGo, Jet Airways (India) Ltd and the Tata Group stepped out of the race and on Wednesday major Gulf carriers Emirates and Qatar Airways PJSC too shied away.

While an Emirates spokesperson told Mint in a email that “Emirates has no plans to buy or acquire any airline", Qatar Airways said it “firmly deny that it is involved in any talks regarding the acquisition of Air India".

Another possible suitor, SpiceJet Ltd, is still in the fray but its chairman Ajay Singh has also in the recent past said that his airline is too small to bid for Air India.

The Tata Group, long considered as potential suitors for Air India, is also unlikely to bid for the airline, a Reuters report dated 11 April said citing two unnamed people aware of the matter. The report attributed the group’s unwillingness to the terms and conditions of the sale, which it considered “just too onerous".

While, IndiGo indicated that it might have been interested only in the international operations of Air India, Jet Airways has said that it will not participate in bidding process.

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“Considering the terms of offer in the information memorandum and based on our review, we are not participating in the process," Jet Airways’ deputy chief executive officer Amit Agarwal told the Press Trust of India on 10 April.

Industry experts say that the government might have to amend the terms of the sale if it is to find a buyer for the airline.

“The (Air India) deal in its present form doesn’t seem to be working," said Peeyush Naidu, Partner, Deloitte Touche Tohmatsu India LLP. “The government may need to reconsider the terms and conditions of the deal and clarify on the airline’s debt and employees."

The problem lies in the government’s plan to sell 76% stake in Air India along with 100% stake in low cost international carrier Air India Express Ltd and 50% in Air India SATS Airport Services Pvt. Ltd, a joint venture services company. It will however not sell individual arms or operations of the airline separately.

Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, said that the government department overseeing the Air India disinvestment process, DIPAM (Department of Investment and public Asset Management) may have to go to the cabinet to bring about major changes (in the terms and conditions).

“Simplifying the deal structure to attract at least 3-4 serious bidders is in the government’s own interest," Dubey added.

A civil aviation ministry official, who didn’t want to be named, said however that the government is unlikely to make major changes in the terms and conditions of the Air India sale.

A few European and American carriers could be interested in acquiring stake in Air India to fend off competition from the Middle Eastern carriers, said Mark Martin, founder and chief executive officer of Martin Consulting, a Dubai-based aviation consulting firm.

“Star Alliance members like Lufthansa, Singapore Airlines, Air China, Air Canada and United Airlines will gain immensely if they were to pick up stake in Air India," Martin said adding that it makes strategic sense for these airlines to buy stake in Air India as the national carrier is sitting on lucrative bilateral deals including ones to Gulf countries.

However, Martin added that these carriers may not be interested in Air India since European airlines are trying to keep their operating costs low on the back of rising oil prices while American carriers are predominantly focused on expanding in their own market.

An industry expert under the condition of anonymity said that government, which expects to sell Air India by end of FY 2019, will find it impossible to do so.

“It will take at least two years for such a complex deal to get through," the expert said.

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