The government will allow a private bidder to pick up a stake of 51% or more in Air India Ltd and plans to complete the sale of the airline by December, minister of state for aviation Jayant Sinha said on Friday.
A group of ministers led by finance minister Arun Jaitley will decide on whether the government will retain a stake and its extent, but management control will be handed over to the new owner, he said at a CNBC-TV18 Mint Budget Verdict conclave in New Delhi. Sinha added that the disinvestment of state-owned helicopter services firm Pawan Hans Ltd was also on track.
The airline will be put up for sale as “four different entities" for which interested parties will be allowed to bid separately, Sinha had said earlier in the day, adding that the information memorandum for the proposed disinvestment would be issued in the next few weeks.
The first company will include Air India’s domestic and international operations, besides Air India Express and Air India SATS. The second will comprise its engineering arm, the third ground handling and the fourth Alliance Air.
The memorandum will lay out details about various aspects of the plan, including what will be available for bidding, assets and how much stake the government will own, said Sinha.
It will also stipulate whether or not the new buyer will have to retain the Air India brand name, among other things.
“We expect to have a winning bidder by the end of June and the legal closing of this transaction by end of this calendar year," Sinha said, adding that so far two formal expressions of interest have been received by his ministry.
Assets like Air India’s Nariman Point headquarters in Mumbai and hotels will be carved out and placed in a separate unit under government supervision. This unit will also hold the unsustainable debt—the quantum of which is yet to be decided.
Some of the other debt will be divided between the four companies to be sold. Sinha said valuation of the company will “most likely" be done on an ongoing entity basis and government-appointed consultants will set a floor price.
IndiGo, run by InterGlobe Aviation Ltd, has shown interest in Air India’s international operations. The Tata group has also shown interest in Air India pending conditions of sale. Another international firm has written to the ministry showing interest but the name has been kept confidential.
Turkey’s Çelebi Aviation Holding, and India’s Bird Group and Livewel Aviation Services Pvt. Ltd have shown interest in the national airline’s subsidiaries.
Air India has a fleet of about 140 planes, with a 17% share of traffic on routes linking India to international destinations and a 13% share of the domestic market.
The airline—which is part of the Star Alliance, the world’s biggest airline grouping—also has prime slots at airports across the world, along with land banks and buildings among its assets.