New Delhi: External factors such as high fuel prices and adverse forex would be key to the success of Air India disinvestment, but aviation experts said that interested bidders will take long-term view of the sector which is the third largest market globally and growing fast.
After failing to attract any bidder in its first attempt to sell the national carrier, the government has sweetened the deal this time by offering 100 per cent stake in the airline to private parties, removing nearly two-thirds of the Rs 60,000 crore debt from its books.
The new buyer will have to take the debt of only Rs 23,286 crore which primarily pertains to long-term aircraft loan. Moreover, total debt and liability on the books of Air India at the time of transaction will be equivalent to the written down value of its assets.
Civil Aviation Minister Hardeep Singh Puri has hinted that the government may further relax the terms of disinvestment to ensure the flag carrier gets a new owner in the next 5-6 months.
“Fuel prices are volatile. Issues like high fuel prices, adverse forex or coronavirus are short-term disruptions that may create a temporary dip in traffic. But this is not going to be permanent. These are short-term issues while Air India disinvestment is long-term,” said former IAS officer and noted aviation sector expert Dhiraj Mathur.
“Whoever is going to bid for Air India, will see what the aviation sector is going to be like in the next 10 years and how is the Indian economy going to do during that period. Fuel prices would certainly be very fundamental to the long-term projections of revenue and profit,” he added.
Many industry veterans have described the proposed Air India deal as sweeter than expected with some of them claiming that a substantial chunk of investment could be recovered by entering into sale and leaseback agreement for the 82 aircraft owned by the carrier.
Air India, along with its subsidiary Air India Express, has a total operational fleet of 146 airplanes.
“Those bidding for Air India will take a long-term view. The ongoing slowdown may not last long. Whoever will bid for Air India will look at long-term planning. In the long-term, most of the external factors such as fuel price will stabilise,” said Rajan Mehra, CEO at Club One Air and former India head of Qatar Airways.
“These factors are certainly key, but they do not take away India’s potential in aviation. Only 2 per cent population currently fly in the country, so there is huge potential. Regardless of the downturn, India’s aviation story will grow in the future,” Mehra noted.
The government is expected to announce the names of shortlisted bidders in the first round by March 31, 2020.
The first attempt by the Narendra Modi-led government to sell 76 per cent of its stake in Air India proved to be a flop show with not a single bidder evincing interest in the preliminary round of bidding. The government later deferred the plan citing high fuel prices and adverse forex, among other issues.
(IANS)