Air India may face closure if divestment fails, says aviation consultancy
The national carrier could lose up to Rs 13,380 crore in two years if sale of 76% stake fails.
A leading aviation consultancy on Friday said it feared Air India could lose $1.5 billion to $2 billion (Rs 10,035 crore to Rs 13,380 crore) for fiscal years 2019 and 2020 if the divestment of the national carrier fails.
“Failure to divest could see AI [Air India] close unless [the government is] willing to spend taxpayer funds,” Centre for Asia Pacific Aviation India tweeted on Friday.
The consultancy said 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, reported Mint. It added that unless bidders were confident that they would be “ring-fenced” from possible political risks, there could be a risk of possible non-participation by interested parties at the ‘request for proposal’ stage.
Three key themes emerging on @airindiain divestment: 2) Unless bidders 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 stage. #indianaviation 2 of 3
— CAPA India (@capa_india) May 4, 2018
Three key themes emerging on @airindiain divestment: 3) CAPA estimates AI headed for 2-year losses of USD1.5-2.0 bn in FY19/FY20. Failure to divest could see AI close unless gov't willing to spend taxpayer funds. Far less costly to make offer more attractive to investors. 3 of 3
— CAPA India (@capa_india) May 4, 2018
CAPA India said it is critical that the terms in the Expression of Interest 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.
On March 28, the government invited bids to divest 76% of its stake in the national carrier through transfer of management, control and sale of equity share capital. On May 1, the government extended the deadline for the submission of bids for the sale of its stake in Air India from May 14 to May 31. The shortlisted bidders will be intimated on June 15.