India is proposing to drop a condition that the winning bidder for Air India Ltd will have to take on $3.3 billion of aircraft debt, people with knowledge of the matter said, as the government struggles to sell the loss-making carrier kept afloat by taxpayer-funded bailouts.
Prime Minister Narendra Modi’s administration is being advised to drop the rule on concern it will deter buyers, the people said, asking not to be identified as the proposal isn’t public. A group of bureaucrats has vetted the plan, and under the new proposition, potential buyers will be allowed to bid on the enterprise value and not on the entity value, the people said.
A renewed attempt to sell Air India, which hasn’t made money since 2007, has been hurt by the pandemic, forcing the government to keep extending a deadline to bid. The offer, announced in January, was sweetened to pass on only the debt related to plane purchases to the new owner. The airline had $8.4 billion in total debt at the end of March, 2019 and posted a loss of $1.2 billion that year—its highest ever.
Despite the losses, the airline has some lucrative assets which include prized slots at London’s choked Heathrow airport, a fleet of more than 100 planes and thousands of trained pilots and crew. The airline will have to shut down if it can’t find a buyer, aviation minister Hardeep Singh Puri told Parliament last year. The new proposal sweetens the deal.
A spokesman for the aviation ministry referred queries to the department of investment and public asset management, a unit of the finance ministry. A finance ministry spokesman wasn’t immediately available for comment.
At least two previous attempts to sell the airline —once about two decades ago and another in 2018—have flopped. In 2001, Singapore Airlines Ltd dropped its bid for a stake in Air India, citing political opposition as one of the reasons. The South-East Asian carrier was seeking a 40% stake with India’s Tata Group.
Potential buyers this time have requested the government to extend the deadline to submit initial bids due to the coronavirus pandemic, the government said last month. Tata SIA Airlines Ltd, a joint venture between Singapore Airlines and Tata group, is evaluating a possible bid, its chairman Bhaskar Bhat had said earlier this year.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.