December 11, 2017

Foreign airlines likely to bid for Air India

Air India

Foreign airlines are likely to be allowed to bid for Air India Ltd if they have a joint venture with an Indian partner.

According to reports floating in the media, foreign airlines will be allowed to bid owing to the current policy that’s applicable on all domestic airlines.

The reports further said that with the change in rules, the government expects to make the sale of Air India more competitive. So far, Tata Group and Interglobe Aviation Ltd have expressed their interest to buy the struggling airline.

“The government will have to make several changes to existing rules before foreign airlines can bid for the state-run airline. First, the Department of Industrial Policy and Promotion’s Press Note No. 6 (2012 Series) has to be amended to remove a clause that bars foreign investment in Air India. Second, international flying rights negotiated between two governments require respective airlines to have local effective control to avail these rights. A change in control to a foreign airline will invalidate these rights,” the reports added.

According to a report in an English Daily in November 2017, "The economics of the game will change completely for whichever airline gets Air India. With its 14% domestic and 17-18% international market share, getting Air India will be a paradigm shift for the successful bidder.”

In July 2017, IndiGo had said that it wanted to buy Air India’s international routes as well as the Air India Express arm. However, the company’s management later made it clear that it had no desire to take all of Air India's debt and it would be impossible to acquire all of Air India's subsidiaries.

Air India had total debt of about Rs 48,877 crore at the end of March 2017, of which, about Rs 17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans.

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