New Delhi: The government’s attempt to privatize loss-making national carrier Air India hit a roadblock with the government not receiving any bids as the 31 May deadline ended. Mint takes a look at what went wrong and what lies in store for the iconic airline.

Why is the Air India sale important?

Air India’s privatisation is increasingly becoming important, given that the administrative machinery does not allow it to be fleet-footed in its decision-making, especially when competition from private sector airlines is on the rise. According to a government official, while private airlines can place orders for hundreds of aircraft with one phone call if they require to do so, there are too many rigid rules and administrative hurdles for Air India to do so, thereby affecting its operational efficiency.

What was on offer?

In April, the central government had invited bids for a 76% stake in Air India Ltd, along with a 100% stake in its subsidiary Air India Express Ltd, and 50% in Air India SATS Airport Services Pvt. Ltd. The initial deadline of 14 May was extended to 31 May. A few investors had initially shown interest and had raised several queries. The government said it responded to over 160 queries, clarifying each point in detail. But in the end, none of the potential buyers submitted a bid. Air India is currently on a capital infusion plan.

What is the airline’s position in the market?

Air India has a 42.8% share of international traffic to and from India among homegrown carriers, and a share of 12.3% of the domestic market.

What went wrong?

The sale proposal had left out many finer details of the terms and conditions of the deal, including employee protection. It said it would disclose the details at a later stage. The selected bidder was also required to remain invested in the firm for three years before any stake sale. Investors were also wary of possible government interference as it would retain a 24% stake. Besides, Air India and Air India Express were to retain 33,392 crore of debt.

What happens next?

The government intends to take a fresh look at the options before it, which may include inviting new bids with revised terms. The failed first attempt gives a credible political reason to relax the terms of the deal. The civil aviation ministry is working on the options available before it. It is expected to present the report before a ministerial panel within a fortnight. The panel will decide whether to go ahead or to call off the privatisation plan.

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