CAPA Fears Air India Could Close Down If Not Divested

The Centre for Asia Pacific Aviation (CAPA), a leading aviation consultancy, on 4 May said it feared Air India could head for two year loss of USD 1.5 to 2 billion and the failure to divest could see the airline closing down.

It said that unless the bidders were confident that they would be "ring-fenced" from possible political risks, there could be a risk of possible non-participation by interested parties at the 'request for proposal (RFP)' stage.

CAPA took to its Twitter handle to express its concern over the ongoing disinvestment process in Air India, calling for amendments in Expression of Interest, especially for labour and debt.

Three key themes emerging on @airindiain divestment: 1) Critical that terms in EOI - particularly for labour & debt – are amended, as successful bidder will need to invest in restructuring and absorbing losses for several years, in addition to consideration paid for 76%. 1 of 3

— CAPA India (@capa_india) May 4, 2018

The government had on 28 March issued preliminary information memorandum for the proposed sale of up to 76 percent stake in Air India along with management control to private entities.

It also put out clarifications for 160 questions from interested bidders on the disinvestment of Air India and its two subsidiaries – Air India Express and AISATS.

The opposition Congress and even RSS affiliates such as Swedeshi Jagran Manch had expressed their dissent over the sale of the national carrier.

Three key themes emerging on @airindiain divestment: 2) Unless bidders confident that they will be ring-fenced from possible political risks if successful, this could prove to be a key reason for possible non-participation by some parties at RFP stage. #indianaviation 2 of 3

— CAPA India (@capa_india) May 4, 2018

Three key themes emerging on @airindiain divestment: 3) CAPA estimates AI headed for 2-year losses of USD1.5-2.0 bn in FY19/FY20. Failure to divest could see AI close unless gov't willing to spend taxpayer funds. Far less costly to make offer more attractive to investors. 3 of 3

— CAPA India (@capa_india) May 4, 2018

"Unless bidders confident that they will be ring-fenced from possible political risks if successful, this could prove to be a key reason for possible non-participation by some parties at RFP stage," CAPA tweeted.

"CAPA estimates AI headed for 2-year losses of USD 1.5-2 billion in FY19/FY20. Failure to divest could see AI close unless government willing to spend taxpayer funds. Far less costly to make offer more attractive to investors," it added.

Industry insiders, however, pointed out that if one was to compare employees' cost and strength, then Air India was at par with the best in industry.

They pointed out that market leader IndiGo had 17,000 employees for a fleet of 150-160 aircraft while Air India had 138 aircraft and less than 17,000 employees.

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