By Hemal Gosai
Air India Employees Make Attempt to Buy the Airline
The Indian government has repeatedly tried to privatize Air India. The first time around there really wasn’t interested by any major entity to buy-in. Then the Indian government went ahead with some financial gymnastics to create special purpose vehicles to take a huge chunk of the airline’s debt off the balance sheet to entice potential buyers.
It seemed to be going well but then as COVID-19 happened the sell-off processes were put on hold as the world struggled to deal with the massive economic and humanitarian fallout of the pandemic.
The privatization attempt is starting to see some attention again, primarily by two groups. One of which makes sense and the other group’s attempt at taking over the airline is a little bit of a headscratcher.
The more reasonable of the groups allegedly interested in Air India is Tata Sons which is said to be in negotiations with its Vistara joint-venture partner Singapore Airlines in an attempt to create a joint bid for Air India.
It is a relatively tangled mess due to the various entities involved.
If Tata Sons were to bid through Vistara it would also need approval from the Singaporean government which holds a majority stake in Singapore Airlines. The Singaporean government is said to not be too keen about Tata bidding for a failing flag carrier.
It is a significant cash outlay and a major assumption of risk by Vistara given the current decline in aviation and the future uncertain.
However, it’s also entirely possible that Tata Sons could go for this alone. This still creates a few snags since Vistara has exclusive rights to undertake “full-service carrier” services within Tata Sons. A sole Tata Sons bid for Air India would require a waiver from the necessary partners and consolidation since there can’t be multiple airlines.
Either way, there is going to be considerable negotiations and challenges.
A new group is apparently making a bid for the airline, Air India employees themselves. It’s a confusing one though because the details aren’t really clear and if they are clear they really don’t make that much sense.
The memo floating around says that if employees each contribute 100,000 rupees they can gather enough cash to partner with a private equity firm to buy the airline and employees would have a 51% ownership take in the airline.
Now it’s unclear whether it’s all 11,000 Air India employees or a “group of 200-250 employees” according to an Air India official.
100,000 Indian rupees is around $1,355 USD which multiplied by 200 or even 250 really isn’t that much. Hardly enough to buy Air India’s old Boeing 737 let alone the entire airline. The plan allegedly is to partner with a private equity firm that will provide the additional capital. However, unless this private equity firm is somehow willing to front the overwhelming majority of the capital for a minority stake in the airline it really doesn’t make sense how this plan will work.
If by some chance it actually is a legitimate deal, I ask 201-251 of our AirlineGeeks readers to contribute $1,356 to outbid the Air India employee consortium and partner with this supposed private equity firm so we can control the airline. If the private equity firm behind this bid is reading this, please email me and we can talk terms.
Employees of Indian airlines trying to buyout their airlines is hardly a new idea. Jet Airways employees tried to team up with AdiGroup, a global management and investment advisory firm to buy the defunct Jet Airways.
The Air India privatization journey continues and gets even more interesting as it goes on. Hopefully, things draw to a close soon.
Hemal took his first flight at four years old and has been an avgeek since then. When he isn’t working as an analyst he’s frequently found outside watching planes fly overhead or flying in them. His favorite plane is the 747-8i which Lufthansa thankfully flies to EWR allowing for some great spotting. He firmly believes that the best way to fly between JFK and BOS is via DFW and is always willing to go for that extra elite qualifying mile.
