This comes even as potential bidders are having second thoughts about the airline, taking into account the changed economic environment. Bidders, who are communicating with the Indian government, say bankruptcies announced by several airlines globally due to the travel ban has hit investor sentiment hard.
“Airlines are now filing for bankruptcies on a daily basis and the new corporate mantra is to conserve cash. In this background, the sale of Air India
looks difficult,” said a potential bidder.
Globally, the airline industry is expected to lose $252 billion in revenues in 2020, as per the airline industry body, International Air Transport Association (IATA) on March 24. The revenue loss projections were doubled compared to what was projected by IATA in early March.
In India too, the industry is expected to report a negative 20 per cent-25 per cent growth during FY21 in terms of airlines passenger growth rate. But given the increase in cases, the end of the pandemic is uncertain and is showing no signs of abating, according to rating firm, CARE.
Indian conglomerates, which were planning to submit their EoIs, like the Tatas, have already announced that their post-Covid mantra will be to conserve cash. Other groups, including Hindujas, are planning to back out, said a source close to the development.
On an average, the share prices of listed airlines across the world have dropped with Norwegian falling by 85 per cent (see chart) since January 1 this year. It has also impacted Indian-listed airlines with Interglobe Aviation (IndiGo) down 24.2 per cent while SpiceJet is down 60 per cent year-to-date.
An executive with one of the Big Four audit firms said they are expecting to hear from the Centre on this by Friday or Monday. “But it’s anybody guess what the future of the sale is. The government cannot sell at a steep discount and would rather wait for the valuations to improve,” the executive said.
Instead of a sale, the government will have to invest more capital in the airline as flights are not operating since the lockdown
“The airline will need a bailout from the government in terms of capital infusion and its loans need to be restructured.”
According to the bid document, the debt to be retained by Air India
and Air India Express remains at Rs 23,286 crore. The rest of the airline’s debt, along with its real estate assets, were transferred to another subsidiary to make the sale attractive.