Air India is inching closer towards the end of its fourth round of bidding. So, what is the latest on the sale? Bidding ends on October 31st, but the government could extend the deadline yet again as buyers remain elusive. Authorities are also mulling more steps to make the deal more affordable, including absorbing Air India’s billions in debt.
Buyers hard to come by
It’s quite clear that 2020 is not the year to be in the commercial aviation industry, especially if you want to sell an airline with over $3bn in debt. This is the conundrum the Indian authorities face with the Air India sale, as buyers remain skittish about finalizing bids for the struggling flag carrier. While a few strong bidders remain in the mix, such as the Tata Group, they are yet to submit a formal bid.
The Indian government itself is running out of options too. Civil Aviation Minister Hardeep Singh Puri recently told Parliament that Air India must be privatized or shut down, as losses continue to grow every day. He has also said that October 31st is the last deadline for bids, but this isn’t the first time such an ultimatum has been issued and later extended.
The airline seems no closer to finding a final bidder than it did a few months ago, prompting the government to consider more measures.
Easing the debt
One move that the government is considering is lowering the overall debt the new Air India owner would have to take on. The government has already wiped off more than half of the over $8bn debt. However, it is now considering removing even more of this debt, according to Bloomberg. Measures could include removing all of the remaining $3.3 billion or a part of the debt. Nonetheless, the government has not announced any details of such a move.
However, wiping off the debt is a considerable burden for the government as it reels from the impact of COVID-19. However, running the airline further could be even more complicated, with a government panel saying operating Air India for two more years could cost over $2bn, according to a government report. Shutting down the airline would leave tens of thousands unemployed and seems highly unlikely.
Now or never
Time is quickly running out for the government to sell Air India. The carrier is burning through government money, with Vande Bharat flights doing little to fill the revenue gap. While October 31st is probably not the last deadline, the government will be pushing to wrap up the sale by the end of the year.
It is also yet to be seen if the government decides to reduce debt or ease any of the sale conditions in the coming months. Without a quick sale, we could see Air India shut down for good, an outcome nobody wants.
What do you think will happen to Air India? Let us know your thoughts in the comments!