Air India, the loss-making airlines owned by the Indian government, which the government is trying to dispose of for years, has not yet attracted any buyers. While the airlines were put up for sale in January, the government added that any potential buyer will also need to absorb Rs 23,286.50 crore debt that comes coupled with the airlines, Air India.
However, yet again the airlines failed to attract any buyers. Along with that, the COVID-19 pandemic led to more losses for the airlines. As the governments around the globe enforced lockdown to contaminate the spread of the coronavirus, the whole airline industry suffered. In India, the union government-enforced lockdown of around three months piled up losses for the airlines. Air India, the already ill airline of the country is about to be admitted to the ICU now. Failing to attract any buyer soon would mean an end for the reputed Indian airline as the government would have no option but to pull the plug.
Therefore, attracting buyers is an imminent task for the Indian government. They have taken several steps this time to make sure the airlines are sold. Due to the COVID-19 pandemic, the Indian government had extended the deadline of the bidding process multiple times, hoping that as the situation gets better, they would receive offers for the sale of the airlines. Alas! There has not been any improvement in the bidding process as no one wants to willingly take up an asset that comes with an underlying burden of $ 3.3 billion debt.
To make things better, the government of India has decided to make arrangements such that anyone who buys the airlines would not have to absorb $3.3 billion debt (or Rs 24,295 crore) of the national carrier, as the government plans to drop debt condition to lure in customers. The union government of India has been advised to scrap the debt rule from the contract, on concern that the rule will deter buyers, according to a report by Bloomberg. The report also mentioned that this proposition has been made so that the people eyeing to buy the airlines will bid on the enterprise value and not on the entity value.
The government in January has revealed that they are looking to sell the entire 100 percent stake of the airlines that have not earned a dime in profit for the government since the year 2007. The government previously had made two attempts to hand over the airlines to new hands. Nearly two decades ago, back in 2001, the government for the first time made attempts to sell the airlines but failed. Again in 2018, they made their intentions known to the public that they are looking for buyers, however, that attempt was also unsuccessful. In 2018, the government proposed a sell of 76 percent of the stake, however, now, they look to sell the entirety of the airlines. The government had also reduced the debt of the company to Rs 23,286.50 crore from Rs 33,392 crore earlier. At Rs 23,286.50 crore, the debt amounts to be more than a third of the total debt of Rs 58,282.90 crore of Air India and its subsidiary called Air India Express. The remaining debt, according to the report, will be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle of the national carrier.
Air India would also sell its entire stake in the budget, profit-making carrier Air India Express and also add 50 percent shareholding in equal joint venture Air India SATS Airport Services (AISATS). All of the three entities would be sold together, as reported.
The airlines have incurred a record loss of ₹ 8,556.35 crores in 2018-19, which is also the highest for the national carrier, compared to a net loss of Rs 5,348.18 crore in 2017-18. As of March 31, 2019, Air India had a total debt of Rs 58,283 crore.