With two major domestic carriers IndiGo and Jet Airways pulling out of the race for Air India and the Tata Group reported to be disinclined to bid , there is a growing chorus for “serious corrections” to the terms of sale laid out by the government.
Key challenges
“The deal structure needs serious corrections,” said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG. “The key challenges are the huge ₹33,000-crore debt burden, which needs to be written off completely, government stake of 24%, which could be reduced to just a single golden share, and full transfer of Air India staff.” He added that some of the other contentious areas were the requirement from the bidder to operate Air India at arm’s length from its other businesses, mandatory IPO and freezing bidder’s shareholding structure at EoI stage.
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Kapil Kaul of the Centre for Asia Pacific Aviation (CAPA) has urged liberalising conditions on retaining the brand and employees, which, he said, could possibly entice Jet and IndiGo to reconsider their decision. “No one will invest billions in Air India and face union disruptions and unexpected costs without firm commitment from the government.”
The Centre’s deadline of completing the transaction by the end of the year was also unrealistic given acquisitions take time, they said.