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Exclusive: Despite lack of interest from buyers, government says no sweeteners for Air India sale

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Singapore Airlines, which runs Indian carrier Vistara partnering the Tatas, has said it is keeping its options open.

Exclusive: Despite lack of interest from buyers, government says no sweeteners for Air India sale
The government will not change the conditions that it has set to privatise Air India despite the lack of interest from potential bidders, said people familiar with the development.
Instead, consultancy Ernst & Young (EY), which is advising the government on the sale, will launch road shows to attract investors, they said, asking not to be identified.
"There is no question of tweaking Air India EOI (expression of interest) conditions midway," said a senior official close to the sale process.
The government is looking to sell 76 percent of the loss-making airline and 100 percent of Air India Express, the budget offshoot that flies on foreign routes to the same buyer. It also wants to sell half of Air India’s ground-handling unit.
The person quoted above contested the widely-held view that the government is passing on an airline that is both unprofitable and saddled with debts.  "People need to read the EOI carefully. Air India's current Interest bearing debt stands at Rs 17,500 crore. Approximately Rs 8,000 crore net liabilities are being used as working capital for day-to-day operations. Another Rs 7,000 crore is towards non-interest bearing lease payments. How is the airline debt laden?” he asked, requesting anonymity.
“We are handing over a profitable airline," said the official.
On March 28, Jayant Sinha, MoS, Civil Aviation told CNBC-TV18, "there is Rs 24,500 odd crore that is interest bearing debt that will be transferred to the new Air India. Remainder of Rs 25,000 crore will remain with the SPV. Interest bearing debt of Rs 8,000 crore will be current liabilities which represents working capital and current liabilities are not interest bearing debt."
In recent weeks, several airlines that were seen as potential bidders have declared that they were not interested in buying Air India.
IndiGo, the only airline that has publicly stated its interest in buying parts Air India, said earlier this week it did not have the capacity to buy the airline in full, one of the conditions of sale. Jet Airways said it will not bid after reviewing the sale conditions and SpiceJet said it is  “too small to buy a big airline like Air India”.
Foreign carriers such as Emirates Airlines and Lufthansa have told CNBC-TV18 that they would no bid for Air India.
Singapore Airlines, which runs Indian carrier Vistara partnering the Tatas, has said it is keeping its options open.
Analysts have blamed the “unfriendly” sale conditions for the tepid interest for Air India. “Serious corrections are required in the deal structure to make it work,” said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.
Air India is attractive to a buyer for its assets, especially the large fleet and lucrative slots and parking bays in India and abroad. But a buyer will also have absorb a debt of Rs 33,392 crore and retain the "Air India" brand name. They will also have to go for an IPO, a condition that the government may have set for exiting with profits.
The official quoted above said there is a huge scope to reduce the airline's operational cost by up to 30%. “Air India also has the option of leasing wholly-owned aircraft to garner revenue," he said.
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