Ways2Capital Reviews : Air India Stake Sale Put On The Back Burner

It is reported that at a high-level meeting between Finance Minister Arun Jaitley, Civil Aviation Minister Suresh Prabhu, Interim Finance Minister Piyush Goyal and Transport Minister Nitin Gadkari and senior officials, it was decided that the government will not be going ahead with the 76% stake sale in Air India as of now.

The government had invited expressions of interest (EoI) on March 28, 2018 for stake sale in Air India. The government proposed to sell 76% of Air India along with low-fare subsidiary Air India Express and a 50% stake in AISATS, a ground handling joint venture with Singapore Airport Terminal Services (SATS), as a single entity along with most of the national carrier’s debt.

However, till May 31, 2018, which was the last date for interested parties to submit an EOI for the airline, not a single bid was received. We believe Air India's huge debt of Rs33,392cr and government's plan to sell the airline as a package (including subsidiaries and JVs) may have discouraged the leading airlines to bid for Air India.

In another development, Air India has sought immediate restoration of Rs2,200cr equity infusion from the government to meet its operational requirements since the process to sell a stake in the airline has come to a halt.

We believe delay in stake sale in Air India is a good news for SpiceJet, Indigo and Jet Airways as the turnaround of the ailing airline would have intensified competition in the long term in the Indian aviation sector, which is anyways reeling under cost pressure due to rising air turbine fuel prices. 

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About Bhoomi Desai