Air India selloff: To avoid a 2001 redux, govt needs strong political will, savvy financial strategy
New Delhi: Finding a strategic partner for Air India, someone who is going to invest and manage the airline responsible for debt, is easier said than done. In fact, the various branches of government seem to have different directions on the best way to go for this white elephant. Niti Ayog prepare a road map for the sale of the company for months; The Ministry of Civil Aviation wants a roadmap of the own Air India countertop; The airline has spoken to banks for massive cuts to reduce debt. And while taking all these disparate actions, the government continues to drive equity in the airline.
Now, when it seems that the government is also interested in exploring the strategic partner track to get rid of Air India, there could be more confusion. Finance Minister Arun Jaitley said in a television interview over the weekend that “history has given us a second chance that (should) be a good investor who has credibility, the Ministry of Civil Aviation will consider (divestment) “.
First, as we said before, a strategic partner is not the only option on the table. The Civil Aviation Minister Gajapathi Raju said earlier this month that the airline itself had been invited to suggest a road map for its future and the means to manage its unstoppable debt. Raju has not ruled out the cession, but persisted in saying that this is one of the options before the government. Remember, the government has consistently said parliament that it did not intend to part with Air India. So said Saturday Jaitley could simply be a balloon rehearsal to judge whether the actors offer a credible proposal for Air India.
Second, unless the government provides substantial standard operating procedures, very few investors can arise to manage an airline whose debt exceeds Rs.50 billion and continues to incur losses despite significant government financial support. While the Government believes that the large fleet of aircraft and other assets such as lucrative slots in saturated airports around the world are positive in the review process of Air India, you must also decide if the debt burden can be reduced – By haircuts by lenders or by radiation – before the plane is attractive to a potential investor.
The Timesreport Economic quoted unqualified Air India officials stating that the Tatas would be the best option if the road was taken strategic investors. Obviously, there has been no comment from Tatas because they already operate two independent companies in the crowded Indian aviation market.
Sources close to the facts indicate that Air India is already in advanced talks to agree on debt equity with certain public sector banks, which also involves a haircut. This agreement includes 19 UPS banks, which are invited to convert about $ 20,000 of credit to airline equity. Exceeding annual annual interest of Rs 4 billion rupees AI could then be reduced by a quarter if banks accept scheme S4A (Sustainable Structuring of Stressed Assets).
While this proposal looks good, no one seems to be willing to answer the simple question, should the government require PSU banks – which are already overburdened by the NPA – to take more S4A through this scheme? Why should banks have a poor management of Air India’s history? Such a scheme could see banks have up to 40% of the capital of an airline that owns approximately 15% of the domestic market in a business dominated by the boom of private actors.
However, two high-level economists have suggested the best way to turn the national airline in check by a major global airline: the result of government traps, according to the mint report.
They highlighted other successful examples of governments leaving the airline, such as the UK that privatized British Airways. “(This was widely considered to be one of the most difficult privatizations of the time Margaret Thatcher in the UK.)