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The Two-Horse Race For India’s Maharajah Enters The Final Lap

Air India, India’s state-owned airline, and its iconic mascot, the Maharajah, may soon find themselves a new owner if the Narendra Modi government’s efforts to privatize the loss-making national carrier bear fruit.

The government has reportedly fixed the reserve price for the airline, though there was no official word about it. Government officials involved in the disinvestment process also have met representatives of the two sole bidders for the airline. The frontrunner is Tata Sons, which has a stake in two airlines–AirAsia India and Vistara. The other is SpiceJet, a low-cost carrier founded by Ajay Singh. Media reports say Ajay Singh himself is bidding for the airline and not SpiceJet.

This is the government’s third attempt to sell the airline, though in earlier attempts the plan was to sell only a majority stake and not the entire stake. The first attempt to rope in a partner for Air India was made in 2000, when the government decided to sell a 60% stake. However, this was given up within two years when there were no bidders. In June 2017 again, the government planned to privatize the carrier, but gave up the process when it failed to attract any buyers for the 76% stake it was offering.

Since then, the government has changed its strategy and decided to sell all its equity shareholding in the airline, despite facing criticism from various quarters. The process kickstarted in December 2020, when the government invited expressions of interest from bidders for its entire stake in Air India, including Air India’s 100% shareholding in AI Express and a 50% stake in AI SATS Airport Services, a ground handling joint venture with Singapore Airlines.

Air India has a fleet of 172 aircraft, including 16 Boeing 777-300 aircraft, 27 Boeing 787-800 and 27 Airbus 321 New Engine option aircraft. More than the fleet, what will be attractive for the bidders are the slots that Air India has, including at international airports such as New York, Chicago, London, Narita (Japan) and Seoul. In Mumbai alone, the airline has close to 20 morning departure slots.

If the Tatas emerge as the successful bidder, it remains to be seen where they will house Air India. Tata Sons has an over 80% stake in Air Asia, a low-cost carrier, in partnership with Air Asia of Malaysia, and a 51 % stake in Vistara, a full-service carrier, in partnership with Singapore Airlines.

It will be a homecoming of sorts for Air India if the Tatas emerge victorious in their bid. For, it was the late J.R.D. Tata who started Air India in 1932 as Tata Airlines. The government nationalized the airline in 1953, but allowed J.R.D. Tata to remain at the helm. He headed the airline until the late 1970s.

According to available information, Air India’s total debt for 2019-20 was over 386 billion rupees ($5.2 billion), after the government transferred a debt of over 220 billion rupees ($2.9 billion) to a special purpose vehicle. The debt has since ballooned to around 430 billion rupees ($5.8 billion). For the financial year 2019-20 (April-March), the latest available numbers, the airline posted a loss of over 74 billion rupees ($1 billion). The accumulated losses are estimated to be over 700 billion rupees ($9.4 billion).

However, the government’s attempt to sell the airline is bound to meet with stiff resistance. Subramanian Swamy, a member of the Upper House from the ruling BJP, has been vocal in his criticism of the disinvestment process itself. It remains to be seen how the government will overcome this and other challenges that it may face, as the process reaches the final stage.

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