Air India likely to fly into further losses if govt’s share sale fails to take off: CAPA
Failure to divest Air India could see the state-owned airline shut down unless the government pumps in taxpayers’ money into the airline, CAPA says
Mumbai: Air India Ltd is set to report an estimated loss of $1.5-2 billion (Rs10,035-13,380 crore) for fiscal years 2019 and 2020, if the divestment of the national carrier fails to take off, aviation consultancy CAPA (Centre for Aviation) India said on Friday on its Twitter feed.
Failure to divest Air India could see the state-owned airline shut down unless the government pumps in taxpayers’ money into the airline, CAPA India said, adding that it would be a far less expensive proposition for the government to make the terms and conditions of the divestment more attractive to investors and make the sale happen.
“Failure to divest could see AI (Air India) close unless gov’t willing to spend taxpayer funds. Far less costly to make offer more attractive to investors,” CAPA India said on its Twitter feed.
“Unless bidders (are) confident that they will be ring-fenced from possible political risks if successful, this could prove to be a key reason for possible non-participation by some parties at RFP (Request For Proposal) stage,” it said.
CAPA India added that it is critical for the divestment of the national carrier that the terms in the expression of interest (EOI)—particularly for labour and debt—are amended, as the successful bidder will need to invest in restructuring and absorbing losses for several years, in addition to paying a substantial amount for buying a 76% stake in the airline.
The government had on 28 March issued the preliminary information memorandum for the proposed divestment. However, major airlines such as IndiGo, Jet Airways, Emirates and Qatar Airways decided not to join the race.
The Tata group, long considered a potential suitor, is also unlikely to bid, a Reuters report dated 11 April said, attributing the group’s unwillingness to the terms and conditions of the sale, which were considered “just too onerous”.
On 1 May, the government extended the privatization process by a fortnight. EOIs for the airline will now be accepted till 31 May, against the previous deadline of 14 May, and qualified bidders will be announced on 15 June, against the previous date of 28 May, said a corrigendum to the EoI document.
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