InvestorQ : Is it true that government may have to shut down Air India if it does not find a buyer very soon?
Katherine Gonsalves made post

Is it true that government may have to shut down Air India if it does not find a buyer very soon?

Arti Chavan answered.
3 years ago

After the last attempt to sell Air India, which did not go through, the Civil Aviation minister, Hardeep Singh Puri, has underlined that if this attempt to sell Air India does not succeed then the government may have no choice but to shut down the airline. Here is what you need to know about Air India.

· The good news is that the government has decided to divest 100% stake in the airline, unlike the previous attempt, where it had decided to retain a 24% stake, which no airline was interested in. To that extent, this should be a better attempt.

· The big question is the debt burden that the buyer will take on. While the total debt of the airline is close to $11 billion, the buyer of the airline will be expected to take on debt to the tune of $4 billion. The government is likely to exclude $7 billion of debt.

· Experts believe that Air India sale can be successful if the airline is broken down into 3 broad pieces: 1) international operations, 2) express services, which they do locally, and 3) ground handing and catering services." There are already expressions of interest from the international operations from Indigo considering the bilateral rights that the airline enjoys currently.

· Ideally, an approach where the airline is sold in parts is likely to be more successful. But the attractiveness of Air India will largely depend on the quantum of debt and the piecemeal approach will result in better overall interest and demand.

I am not sure if Indian government will really look at shutting the airline but surely the financial situation on the airline front is tight.