Almost two years since the first attempt which failed to enthuse buyers, Air India is back on sale . Call it the government’s desperation to exit the troubled airline that is devouring tax-payer money or call it smart learning from the last failed attempt, but the terms this time are exceptionally favourable and clearly appear to be tailored based on feedback from prospective buyers. As per the document inviting Expression of Interest (EOI), the government will sell 100% equity in the national carrier and Air India Express Ltd. and its 50% holding in AISATS, the joint venture with SATS Ltd., Singapore; the debt that the buyer will assume has been whittled down to ₹23,286.50 crore to match the written down value of its assets; the net worth of prospective bidders is reduced to ₹3,500 crore and bidding consortium members can have as low a stake as 10% only. It almost appears as if the terms are designed with specific bidders in mind. But there is one catch. The government has not addressed a prime hurdle to the stake sale — the fate of 17,984 employees of Air India and Air India Express, 9,617 of whom are permanent. Of the three troublesome factors that put off bidders the last time round — the government’s insistence on holding a 24% stake in the airline post-privatisation, the large debt that it was expecting the buyer to assume and employee issues — the first two have been addressed but not the last one.
Apart from the huge employee base, the successful bidder will also have to deal with pension liability for the airline’s retired employees and their perks such as free/rebated tickets. All that the EOI document says is that contingent liabilities due to retired employees will be clarified at the Request for Proposal stage. If there is one weak spot on which the sale attempt could falter it is this. There is no escaping the fact that whoever buys the airline will have to shed surplus labour. A turnaround will not be possible without pruning employee costs. Maybe the government is hoping to negotiate with short-listed bidders on this sensitive issue that could have the airline’s unions up in arms. Yet, lack of upfront clarity on this may put off prospective bidders. The government ought to have gone the whole hog and clearly stated its intent. Maybe a moratorium for a specified period on forced attrition could have been spelt out. This would have helped bidders make up their minds. There has been criticism that a “nationalist” government is selling off the national airline . But such criticism has to take into account that precious taxpayer money has been washed down the drain trying to save the airline. A whopping ₹30,500 crore has been sunk into Air India since 2012 despite which it has been posting losses. The best way to save the airline, its jobs and the national exchequer is to sell it. And sell it on the best possible terms with minimum compromise on employee interests.