Considering the terms of offer in the information memorandum and based on in-house review, Jet Airways is not participating in Air India stake sale process, says CFO Amit Agarwal
New Delhi: Jet Airways (India) Ltd on Tuesday said it will not bid for Air India, the second airline after IndiGo to say so, indicating some of the possible bidders do not find synergy in acquiring the debt-ridden national carrier.
“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," said Amit Agarwal, deputy chief executive officer at Jet Airways, in response to an emailed query.
Agarwal did not divulge specific reason about the decision to not participate in the stake sale process. Last month, people in the know had said that a consortium of Jet Airways, Air France-KLM and Delta Airlines was understood to have expressed interest in the disinvestment of Air India.
The government stake sale in Air India as well as its two subsidiaries seem to be hitting air pockets with the two potential bidders deciding to keep away citing the contours of the process.
Kicking off the disinvestment process, the government has came out with a detailed preliminary information memorandum, detailing plans to offload up to 76% stake in Air India and transfer the management control to private players.
Naresh Goyal-led Jet Airways’ statement on Tuesday comes less than a week after no-frills carrier IndiGo aborting plans to acquire Air India’s international operations. On 5 April, IndiGo president and whole time director Aditya Ghosh said that from day one, the airline has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express.
“However, that option is not available under the government’s current divestiture plans for Air India. Also, as we have communicated before, 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," he had said in a statement.
IndiGo was the first to evince interest in Air India disinvestment when the government had mooted the plan last year. According to the memorandum, issued on 28 March, the government would retain 24% stake in the national carrier, the winning bidder would be required to stay invested in the airline for at least three years.
The proposed disinvestment would include profit-making Air India Express and joint venture AISATS. The latter is an equal joint venture between the national carrier and Singapore-based SATS Ltd. The existing debt and liabilities of Air India and Air India Express as on 31 March 2017 would be re-allocated, as per the memorandum.
“It is expected that debt and liabilities, including net current liabilities of Rs88,160 million, aggregating to Rs3,33,920 million will remain with AI and AIXL (no change for AI-SATS except in normal course of business). This number shall be further adjusted to account for material business developments post March 31, 2017 for instance purchases/ delivery of aircraft etc. The balance debt shall be allocated to Air India Asset Holding Limited which is 100 per cent owned by the Government of India subject to receipt of requisite approvals from lenders and regulators, as applicable," the memorandum said.
Contingent liabilities would remain with Air India and Air India Express. Within the contingent liabilities, income tax, customs duty, as well as service tax and guarantee fee/ penal charges due to the government would continue to remain with Air India.
There would be the “government commitment to make it good/ indemnify in case the liabilities are confirmed against Air India," the memorandum said. The last date for submission of expression of interest (EoI) is 14 May and intimation to the qualified interest bidders would be made on 28 May. The national carrier is staying on taxpayers’ money under the turnaround plan approved by the previous United Progressive Alliance (UPA) government in 2012.