Venkat Raman
Auckland, January 27, 2020
India’s National Flag Carrier is for sale, again.
Air India, which was once the pride of the aviation industry and an epitome of service and creativity, is in serious financial crisis, with some experts saying that if there are no takers, the airline will be forced to crash and become extinct.
Woes of the Carrier
They say that the airline, which has more than US$ 8 billion in debts, is losing about US$ 2 million every day. Air India’s current woes have been attributed to low fares and low-profit orchestrated by unhealthy competition. More importantly, India’s Open Sky Policy has encouraged almost all other national carriers to operate into the country, increasing capacity.
A government notification said that Ernst & Young LLP India has been appointed Transaction Advisor and that the bid for the airline will close March 17, 2020.
The sale will not include, among others, Air India’s iconic building at Nariman Point, Mumbai and Corporate Headquarters located near Connaught Place in New Delhi.
A similar open market sale announcement in 2018 did not enlist even a single response.
According to Bloomberg, bidders this time should agree to absorb $3.26 billion of its debt.
The entire company will be sold but effective control will be with Indian nationals.
About Air India
Air India was founded by J R D Tata as ‘Tata Airlines’ in 1932.
(Picture from Wiki Commons Media)
A licensed pilot, Mr Tata himself flew the first singe-engine de Havilland Puss Moth, carrying mail from Karachi (now in Pakistan) to the then Juhu aerodrome in Bombay (now Mumbai).
This flight was later extended to Madras (now Chennai).
After World War II, in 1946, Tata Airlines became a public limited company and was renamed Air India. In 1948, the Indian government purchased 49% stake and in 1953, nationalised it.
On February 21, 1960, the airline took delivery of its first Boeing 707, named it ‘Gauri Shankar,’ and became the first airline to induct a jet aircraft to its fleet.
In 2000-2001, attempts were made to privatise Air India.
From being one of the most profitable airlines, known for excellent inflight cuisine, entertainment and service, Air India became a loss-making company in 2007, after its merger with Indian Airlines, India’s largest domestic carrier, which also went into rough weather.
Currently, Air India operates domestic and Asian destinations through its subsidiaries ‘Alliance Air’ and ‘Air India Express.’
Air India’s mascot is the Maharaja (Emperor) and its logo consists of a flying swan and the wheel of Konark inside.
Seven things to know about the Sale (from NDTV)
- The government is determined to sell 100% stake in Air India, which is operating domestic and international routes.
- March 17, 2020 is the deadline for potential buyers to submit their initial expressions of interest, agreeing to assume about US$3.26 billion debt, with other liabilities
- While several of Air India’s subsidiaries will be excluded from the sale, the buyer will get 100% of low-cost arm Air India Express and 50% of AISATS, which provides cargo and ground handling services at major Indian airports, the bid document showed. The deal will not also include four Boeing 747 aircraft, reserved for VVIP travel.
- Control of the carrier will remain with an Indian entity, limiting the scope of any foreign bidders interested in the asset. The successful bidder will control the airline’s 4400 domestic landing and parking slots and 1800 international slots at Indian airports, as well as 900 slots at overseas airports.
- In 2018, the government had tried to sell 76% stake in the ailing carrier and offload about US$5.1 billion of its debt, terms that potential buyers viewed as too onerous.
- With Air India reeling under around Rs 80,000 crore worth of debt, the government has said there is no option but to privatise the carrier.
- The government needs cooperation of Air India employees for carrying out the privatisation process
Air India was also known for its creative advertising, with good and clean humour. Press advertisements and posters, with the Air India Maharaja as the central theme caught the attention of people all over the world. We will feature some of these, as we feature ‘Air India Series’ from time to time. This Reporter has had close interaction with many stalwarts of the airline for more than 50 years.
