- Where IndiGo can bid for a 100% stake in Air India, Etihad can own only 49%, according to the current FDI rules.
- The Tata Group, which formed the airline, confirmed that there was no interest in bidding for the airline.
According to news reports, budget carrier IndiGo and Abu Dhabi-based Etihad Airways have reportedly approached the government in a major relief for the ailing Maharaja-Air India to acquire the debt-laden national carrier.
This development came shortly after Air India’s senior official expressed concern over the future of the troubled carrier, which he said could be shut down by June next year if it could not find a buyer. Meanwhile, Minister of Civil Aviation Hardeep Singh Puri said that the plan to privatize the ailing Air India was going well even as the attempts of the government in the past to find a suitable buyer for the crisis-hit airline were unsuccessful.
The government intends to sell 100 percent of the airline’s shares in its second attempt to privatize Air India. The government said it would hold a 24 percent stake in Air India in the previous attempt in 2018. While IndiGo operator InterGlobe Aviation can bid for a 100% stake in Air India, due to foreign direct investment (FDI) standards, Etihad can not buy more than 49%.
Etihad holds a 24 percent stake in Jet Airways, which has been grounded since April.
The Plight of Air India:
The Tata Group, which formed the airline, confirmed that there was no interest in bidding for the airline.
A senior Air India official said on Monday that the airline could be forced to shut down by June next year unless it finds a buyer as a’ piecemeal’ arrangement can not be maintained for a long time.
In the midst of continuing confusion about the national carrier’s fate, the official said that funds are also required to restart operations on the 12 grounded narrow-body aircraft of the airline.
The national carrier has a debt burden of around Rs 60,000 crore, and the government continues to work on disinvestment modalities.
Sounding warning bells, the official said that if a prospective buyer doesn’t come on board by June next year, Air India might well go the Jet Airways route.
Future Seems Blurred:
Where IndiGo can bid for a 100% stake, Etihad can own only 49%, according to the current FDI rules. Such requirements require a foreign airline to own up to 49 percent of an Indian carrier but allow an airline to spend 100 percent from abroad. Etihad can therefore hold a 100% stake in Air India by connecting either the National Investment and Infrastructure Fund (NIIF) or the Abu Dhabi Investment Authority (ADIA).
The NIIF is an investment company in infrastructure funded by the Indian government. It was set up to secure long-term capital for the infrastructure sector in the country.
In the aviation sector, the government allows 100% FDI for MRO (maintenance, repair, overhaul, ground handling, and aircraft procurement under the automatic route, but not for airline control. The expression of interest (EoI) document is likely to be released in January 2020, the study said.
The sale is expected to help the government move closer to the FY20’s Rs 1.05 lakh crore divestment goal.