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lightsaber
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Air India Privatization, by June-Failed sale. What next?

Tue Jan 09, 2018 6:17 pm

https://scroll.in/latest/864373/governm ... uggestions

“We will seek expressions of interest certainly in February,” Civil Aviation Secretary Rajiv Nayan Choubey said, according to Mint. Choubey said authorities are drafting the invitation calling for bids and will submit it to the ministerial group given the task of overseeing Air India’s privatisation.

The government wants to wrap up the transaction by June, The Times of India reported. “Transaction advisers have been appointed,” the newspaper quoted an official as saying. “We will complete the process by June.”


Now, the amazing amount of politics going on with Air India is certain to extend the process. I happen to agree though that the longer this takes, the less Air India's assets are worth.

Lightsaber
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Spiderguy252
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Re: Air India Privatization by June

Tue Jan 09, 2018 6:49 pm

Believe it when you see it.
Vahroone
 
vadodara
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Re: Air India Privatization by June

Tue Jan 09, 2018 7:19 pm

lightsaber wrote:
Now, the amazing amount of politics going on with Air India is certain to extend the process. I happen to agree though that the longer this takes, the less Air India's assets are worth.

Lightsaber


It is very doubtful anyone will buy Air India as a 'brand'. Ratan Tata was willing a few years ago, because of nostalgia. Now with Air Asia and Vistara, it is highly doubtful.

So most of the value is in terms of real estate, i.e. slots at BOM, international airports like LHR and so forth, and actual buildings/offices. There is still opportunity in terms of engg units and ground handling.

Either way, better for govt. to liquidate it sooner than later.
 
subramak1
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Re: Air India Privatization by June

Tue Jan 09, 2018 7:42 pm

As this government has shut down HMT watches, tractors and few other public sector firms.

They also have implemented stricter bankruptcy laws which is forcing many promoters of bank loan defaulters to either pay up or sell their assets.

So , I do believe they will sell Air India off . The jun timeline looks aggressive. But in scheme of things that this government has dared to implement like demonetization and GST, selling off Air India is frankly small. I am not commenting on the validity of those decisions but impact wise they are far more than selling Air India

Subu
 
vadodara
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Re: Air India Privatization by June

Tue Jan 09, 2018 8:09 pm

subramak1 wrote:
They also have implemented stricter bankruptcy laws which is forcing many promoters of bank loan defaulters to either pay up or sell their assets.



If the bankruptcy law was in existence a few years ago, Air India, would have been sitting there then.

As you highlighted, lots of politically connected people are paying up or selling their assets. In this environment, AI stand no chance. Unions should instead focus on negotiating the best deal possible and make a quiet exit.
 
drgmobile
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Re: Air India Privatization by June

Tue Jan 09, 2018 8:30 pm

vadodara wrote:
lightsaber wrote:
Now, the amazing amount of politics going on with Air India is certain to extend the process. I happen to agree though that the longer this takes, the less Air India's assets are worth.

Lightsaber


It is very doubtful anyone will buy Air India as a 'brand'. Ratan Tata was willing a few years ago, because of nostalgia. Now with Air Asia and Vistara, it is highly doubtful.

So most of the value is in terms of real estate, i.e. slots at BOM, international airports like LHR and so forth, and actual buildings/offices. There is still opportunity in terms of engg units and ground handling.

Either way, better for govt. to liquidate it sooner than later.


There was some coverage on this in the fall. TATA was quite vague on its interest but it does lack access at capacity constrained Mumbai and an international network (as noted in this article that appeared earlier today: http://airlines.einnews.com/article/425 ... cmRg%3D%3D)

TATA's executive chairman said in October, “We need to look at aviation as a whole. We are subscale. We got two airlines both are subscale. Any decision that we take—Air India or otherwise—we have to have a story because we can’t be operating with 15 aircraft or 20 aircraft. I feel scale is important, in every industry in every group we operate in scale is important. Without scale you get to a situation where you are all over the place and it is very, very difficult to pay management attention." (Source: http://www.livemint.com/Companies/2th5R ... karan.html)

IndiGO indicated it was interested in buying Air-India's international operations, but the central government in late December indicated it will probably sell the company's domestic and international operations together (which will probably limit interest) : https://timesofindia.indiatimes.com/bus ... 887768.cms
 
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seabosdca
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Re: Air India Privatization by June

Tue Jan 09, 2018 9:11 pm

I think this is one of the rare cases were liquidation of a going concern would net more money than selling the operating business.

No one is going to want to inherit AI labor/employment drama or a short-haul network that will almost immediately require a fleet of replacement aircraft just to keep operating.
 
dtw2hyd
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Re: Air India Privatization by June

Tue Jan 09, 2018 9:48 pm

Just to be clear, June 2018???

You can liquidate assets, but all AI's assets are in real estate and entangled mess, Building as collateral for working capital debt on a land on 99-year lease. Also, a government cannot away from debt.

Create a special purpose vehicle to move real estate and $6.5B debts. Giveaway the rest to friends.

If the revenue, expenditure and debt servicing fees of av debt remain the same first year a privatized AI will have a net profit of $500M.

Indian Taxpayers have to figure out on allocating $800M to pay interest every year until SPV pays off $6.5B debt.
 
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lightsaber
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Re: Air India Privatization by June

Wed Jan 10, 2018 12:06 am

seabosdca wrote:
I think this is one of the rare cases were liquidation of a going concern would net more money than selling the operating business.

No one is going to want to inherit AI labor/employment drama or a short-haul network that will almost immediately require a fleet of replacement aircraft just to keep operating.

I agree, however there is so much emotion with Air India that this will be a process...

The issue is the unions/staff won't reform. AI must get profitable. It has been too long. As per my OP link:
<i> At the end of 2016-’17, Air India’s total debt was Rs 48,876 crore. The company has not made a profit in 10 years. In 2017-’18, it is expected to report a loss of Rs 3,579 crore. </i>

Adding to a huge debt pile at the rate of 7% a year isn't good. Debt over twice revenue isn't good.

More subsidies won't be accepted. So either it will have debt paid off and sold or it will be shut down.

Since I doubt there is the political will to just shut it down. So the question is how it will be sold. For the shear rate AI is able to generate debt is too impressive.


Lightsaber
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.
 
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lightsaber
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Re: Air India Privatization by June

Wed Jan 10, 2018 12:21 am

drgmobile wrote:

IndiGO indicated it was interested in buying Air-India's international operations, but the central government in late December indicated it will probably sell the company's domestic and international operations together (which will probably limit interest) : https://timesofindia.indiatimes.com/bus ... 887768.cms


I do not see why any buyer would want the domestic and international operations together. It will be interesting if someone does want both...

Lightsaber
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BawliBooch
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Re: Air India Privatization by June

Wed Jan 10, 2018 1:39 am

Was discussed in the last Parliament session. It will not happen.

This Govt wants to sell off Air India to a pittance to its cronies like Ajay Singh (SpiceJet) so the new owners can asset strip the airline. And mind you, the taxpayer will still be footing the bill as the Govt intends to clear the debt burden before the sell-off.

AI is operationally profitable. It is the interest burden on the loans that is dragging it down. If the Govt would just clear it off now, AI would be profitable airline overnight. So what stops them from doing that?
L' Esprit de Mai 68
 
Planeyguy
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Re: Air India Privatization by June

Wed Jan 10, 2018 1:51 am

Is it possible for a Star Alliance member like Singapore Airlines to have a stake in Air India?
 
vadodara
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Re: Air India Privatization by June

Wed Jan 10, 2018 3:19 am

Planeyguy wrote:
Is it possible for a Star Alliance member like Singapore Airlines to have a stake in Air India?


Govt has announced their intention to sell to domestic airlines. Again domestic airlines should have a shot at foreign airport slots.

In any case Vistara bidding for AI means the same as SQ.
 
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unrave
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Re: Air India Privatization by June

Wed Jan 10, 2018 10:22 am

BawliBooch wrote:
Was discussed in the last Parliament session. It will not happen.


The latest announcement comes after the parliamentary panel submitted its report against privatisation. There really seems to be light at the end of the tunnel this time.

The latest development is that government has today permitted foreign airlines to invest up to 49 per cent in Air India, paving the way for a possible TATA-SIA bid

https://economictimes.indiatimes.com/ne ... 442527.cms
Air India is a national embarrassment
 
dtw2hyd
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Re: Air India Privatization by June

Wed Jan 10, 2018 11:59 am

Six months back allowing 100% ownership by a foreign airline would have guaranteed QR taking over AI without continued burden to Indian taxpayers.

As long as GoI keep tweaking rules to make Tata as the single eligible bidder, this process will not move forward. Tweak rules to help a motivated buyer, not someone who hasn't shown any skills in airline management.

A parliamentary committee released draft report against AI privatization. It also released a report private airline, apparently Indigo is the worst in treating passengers. There were about 600 cases of 6E employees abusing passengers. Don't have details on time period. Indigo is blaming Indian education system, apparently, it cannot hire qualified customer-facing employees. Others are saying it is a failure of Indigo's training program.

SIA is more of a brand image management company and less of an airline. Second best in the hype category.

It appears a lot has changed in Indian politics over last six months. With recent black eyes and facepalms, current government may not be in a position to form a government in 2019.
So it is important to make sure this a success and not the third biggest mistake of the current Indian government, after demonetization and GST.
 
vadodara
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Re: Air India Privatization by June

Wed Jan 10, 2018 2:12 pm

dtw2hyd wrote:
As long as GoI keep tweaking rules to make Tata as the single eligible bidder, this process will not move forward. Tweak rules to help a motivated buyer, not someone who hasn't shown any skills in airline management.


Tata's? I thought govt. was tweaking rules to favor 'cronies' like SpiceJet. In anycase, when govt. nationalized the airline, the Tata's were running Air India just fine.

dtw2hyd wrote:
A parliamentary committee released draft report against AI privatization. It also released a report private airline, apparently Indigo is the worst in treating passengers. There were about 600 cases of 6E employees abusing passengers. Don't have details on time period. Indigo is blaming Indian education system, apparently, it cannot hire qualified customer-facing employees. Others are saying it is a failure of Indigo's training program.


Perhaps they hired too many ex Air India. In anycase, let the flyers determine whom they fly.

dtw2hyd wrote:
With recent black eyes and facepalms, current government may not be in a position to form a government in 2019.
So it is important to make sure this a success and not the third biggest mistake of the current Indian government, after demonetization and GST.


Air India, demo, GST? Too much importance to an airline crawling with ungrateful employees that commands too little market share. If BOM were not slot restricted and Air India Bldg. at Nariman Point non-existent, most people may ask Air India who?

Seems like recently there were 2 elections, both won by BJP. In one state, BJP won 2/3rd seats. In other, BJP won by 8 percentage points. i.e. BJP won over 50% vote. I suppose from the land of Aryabhatt and Bhaskar, it is time we had a counter mathematical culture. Perhaps, Rahul Gandhi is a genius after all!
 
dtw2hyd
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Re: Air India Privatization by June

Wed Jan 10, 2018 2:53 pm

vadodara wrote:
the Tata's were running Air India just fine.


One guy hauling mail on a Puss Moth in 1932 is slightly different from running an international airline in 2018.

Were there any bad airlines in that era?

Both Vistara and Air Asia India are duds, what makes you think they can run a more complex airline? Where would the money and talent come from?
 
PPVRA
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Re: Air India Privatization by June

Wed Jan 10, 2018 4:28 pm

I can't tell if there's a lot of love for AI or not because I'm not too familiar with Indian aviation, but I can share a tale from Brazil (where I'm from) that may apply here. . .

VARIG was an iconic Brazilian airline. One of the oldest airlines in the world by the time it finally went bankrupt. This airline was beloved by the whole country and a symbol of national pride. My username, PP-VRA, was the tail number of VARIG's first 777.

Around the time VARIG was practically bankrupt but still operating, there were a number of other players who were in a similar boat--

VASP
TransBrasil
Other smaller players

All "classic" brands in Brazil. Today, all of the above and many smaller ones are gone. It was painful to see all them go, especially VARIG. But this has lead to a rebirth of aviation in Brazil, with much stronger players, much more growth and a much brighter future.

My advice is don't get attached to brands. The future is much more important than the past, so don't let zombies sacrifice it. We got lucky in Brazil that our government didn't step in to save those airlines. We started again with a clean slate and we're much better off for it.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
CaliguyNYC
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Re: Air India Privatization by June

Wed Jan 10, 2018 5:04 pm

dtw2hyd wrote:
Six months back allowing 100% ownership by a foreign airline would have guaranteed QR taking over AI without continued burden to Indian taxpayers.

As long as GoI keep tweaking rules to make Tata as the single eligible bidder, this process will not move forward. Tweak rules to help a motivated buyer, not someone who hasn't shown any skills in airline management.

A parliamentary committee released draft report against AI privatization. It also released a report private airline, apparently Indigo is the worst in treating passengers. There were about 600 cases of 6E employees abusing passengers. Don't have details on time period. Indigo is blaming Indian education system, apparently, it cannot hire qualified customer-facing employees. Others are saying it is a failure of Indigo's training program.

SIA is more of a brand image management company and less of an airline. Second best in the hype category.

It appears a lot has changed in Indian politics over last six months. With recent black eyes and facepalms, current government may not be in a position to form a government in 2019.
So it is important to make sure this a success and not the third biggest mistake of the current Indian government, after demonetization and GST.


So confused why is the only solution selling AI to Qatar or one of the ME3? Don’t you think India needs to develop a strong aviation sector? India is a relatively liberalized aviation market (while not open skies with ME3, the seats granted have been very generous). EY proved that the ME3 have ZERO interest in developing Indian aviation. All they want are more seats between India and the ME. Did EY improve 9W, train them, push them to expand? No, No, No. The best thing that happened to 9W was AF/KL/DL To call SQ just a brand marketing firm is just plain crazy. SQ is one of the best managed airlines in the world. Also SQ has every incentive for AI to be strong and remain full service. SQ realistically cannot build a model around Indian premium traffic except India to SE Asia and OZ. That said, certain routes like BOM/DEL - OZ are prime for nonstops because of growing business and VFR links. Finally I would handle say QR is the model of a well run airline that treats its staff great and has uniformly polite staff. BTw there is noting stopping any of the ME3 to PARTNER with indian carriers in a metal neutral relationship like BA/AA, KL/DL etc. China is a great example of balancing pseudo/managed open skies while developing its own airlines
 
BLRAviation
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Govt. allows 49% FDI in Air India

Wed Jan 10, 2018 5:21 pm

The Indian government has removed the restriction on foreign direct investment in Air India.

In a release the Government said “It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that:
i. Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly
ii. Substantial ownership and effective control of Air India shall continue to be vested in Indian National.”


This raises some interesting possibilities and I thought it should make for interesting discussion here on A.net.

Who all do you think will take advantage of this decision?

It is almost certain that the Tata-Singapore Airlines will now enter the fray. Will it be through Vistara or will they float another entity?

IndiGo 6E is the only carrier that has expressed interest in AI but it wants only the international ops.

Vistara is constrained by the airport saturation at the corporate capital of India, Mumbai. By opting for just the international operations of Air India, IndiGo opens the field for Vistara to buy Air India domestic and get those vital prime-time slots at Mumbai and all other slot constrained airports across India. The Air India A320neo fleet powered by CFM LEAP-1A engines, the same that Vistara is already using. In addition, Vistara buys capacity from rival airlines in tier-II and tier-III markets to fulfil its routes dispersal guidelines government requirements. The Air India domestic network serves many of these markets. Its acquisition will give Vistara a ready-made network.

Will the government realise the best value and split up AI and sell it?

Do you see any of the MEB3 (EK EY QR) seizing on this opportunity?

What about Spicejet? Do you see them tying with a business house or foreign fund to bid?
I am on Twitter @BLRAviation
 
Blerg
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Re: Govt. allows 49% FDI in Air India

Wed Jan 10, 2018 5:25 pm

How likely is it that the Indian government will allow the minority owner to actually introduce any difficult, yet very much needed, changes? Somehow I don't think they would be too willing making any investment pointless.
 
Antarius
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Re: Govt. allows 49% FDI in Air India

Wed Jan 10, 2018 5:40 pm

Blerg wrote:
How likely is it that the Indian government will allow the minority owner to actually introduce any difficult, yet very much needed, changes? Somehow I don't think they would be too willing making any investment pointless.


Minority owner? The only restriction was 49% foreign investment. The remaining 51% isn't staying with the Government.

The GoI isn't keeping AI, so what the new owners do is up to them.
2018 : AUA | CLT | IAH | HOU | DFW | COS | DEN | CLL | ORD | PVG | PEK | PHX | OAK | SFO | SJC | PHL | YYC | STL | DTW | HNL | OGG | JFK | LGA
 
dtw2hyd
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Re: Air India Privatization by June

Wed Jan 10, 2018 6:00 pm

CaliguyNYC wrote:
So confused why is the only solution selling AI to Qatar or one of the ME3? Don’t you think India needs to develop a strong aviation sector? India is a relatively liberalized aviation market (while not open skies with ME3, the seats granted have been very generous). EY proved that the ME3 have ZERO interest in developing Indian aviation. All they want are more seats between India and the ME. Did EY improve 9W, train them, push them to expand? No, No, No. The best thing that happened to 9W was AF/KL/DL To call SQ just a brand marketing firm is just plain crazy. SQ is one of the best managed airlines in the world. Also SQ has every incentive for AI to be strong and remain full service. SQ realistically cannot build a model around Indian premium traffic except India to SE Asia and OZ. That said, certain routes like BOM/DEL - OZ are prime for nonstops because of growing business and VFR links. Finally I would handle say QR is the model of a well run airline that treats its staff great and has uniformly polite staff. BTw there is noting stopping any of the ME3 to PARTNER with indian carriers in a metal neutral relationship like BA/AA, KL/DL etc. China is a great example of balancing pseudo/managed open skies while developing its own airlines


Regulation restricting airlines from borrowing working capital from global sources is the single reason crippling Indian aviation.

There should be a diverse and robust sector but India is moving towards monopoly. Indians keep saying AI has just 13% domestic market share, should be like 6E with 40%. 6E is an anomaly, even the largest airlines like DL, UA, and AA all three each have less than 18% domestic market share.

You need a buyer who can write checks to Indian PSU Banks and show them the door, so buyer should come-in with $4B to $6B initial investment. IMHO only QR has that kind of money and interest in aviation. No need for any 9W-EY like quid-pro-quo BASA with Qatar,

9W-EY, TATA-SIA, and TATA-Air Asia Bhd all failed because of they all started with less than $300M startup capital, soon to realize they cannot bring more working capital from foreign partner and have to depend on Indian banks.

Offering best pax-ex and running airline efficiently are two different things. EK does in your face PR, SQ does the same very quietly.
 
vadodara
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Re: Air India Privatization by June

Wed Jan 10, 2018 6:41 pm

dtw2hyd wrote:
vadodara wrote:
the Tata's were running Air India just fine.


One guy hauling mail on a Puss Moth in 1932 is slightly different from running an international airline in 2018.

Were there any bad airlines in that era?

Both Vistara and Air Asia India are duds, what makes you think they can run a more complex airline? Where would the money and talent come from?


Yes, that is the definition of a 'Pioneer'. Just like Juan Trippe and Howard Hughes.

Both were hugely successful in their day and era. When their follow-on's could not adjust to the new era called 'deregulation', both the airliners faltered and failed. And so did others like Eastern, Braniff and so. None of them got govt. hand out's. And if Air Asia and Vistara are dud's, they will fail. Atleast they are not on govt. money.

However, in your book, everyone other than Air India is a dud. Or am I missing something?
 
vadodara
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Re: Govt. allows 49% FDI in Air India

Wed Jan 10, 2018 6:44 pm

BLRAviation wrote:
It is almost certain that the Tata-Singapore Airlines will now enter the fray. Will it be through Vistara or will they float another entity?

IndiGo 6E is the only carrier that has expressed interest in AI but it wants only the international ops.

Vistara is constrained by the airport saturation at the corporate capital of India, Mumbai. By opting for just the international operations of Air India, IndiGo opens the field for Vistara to buy Air India domestic and get those vital prime-time slots at Mumbai and all other slot constrained airports across India. The Air India A320neo fleet powered by CFM LEAP-1A engines, the same that Vistara is already using. In addition, Vistara buys capacity from rival airlines in tier-II and tier-III markets to fulfil its routes dispersal guidelines government requirements. The Air India domestic network serves many of these markets. Its acquisition will give Vistara a ready-made network.


Yes, slots at BOM are potentially very valuable. Perhaps not for 6E but likes of Vistara and Spice Jet.

In addition, Air India Express is a ST bus to gulf. Prime market for Air Asia. Only issue is the obsolete fleet. However, these opportunities come only once in a while. I suspect they may jump.
 
dtw2hyd
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Re: Air India Privatization by June

Wed Jan 10, 2018 7:57 pm

vadodara wrote:
Atleast they are not on govt. money.

However, in your book, everyone other than Air India is a dud. Or am I missing something?


Well, Tatas are looking for a front-loaded bailout AKA debt write off, continued sovereign guarantees on av asset debt and even possible rest of the bailout.

Right now Air India pays 3%-5% (some of the best rates in the world) on aircraft lease/finance. Do you think any lender will offer same to Tatas.

Show me one post where I am against A privatization, all I am saying sell it to someone with money, talent, and motive. Tatas lack all three.
 
Egerton
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Re: Air India Privatization by June

Wed Jan 10, 2018 8:36 pm

I suggest that a purchaser will best be from India, and therefore they will already know the local situation. I also suggest that there will be no purchaser unless the Government of India sell all its shares and steps out of the way. Apart from that the GoI is to be praised for moving in the right direction.
 
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lightsaber
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Re: Govt. allows 49% FDI in Air India

Wed Jan 10, 2018 8:49 pm

BLRAviation wrote:
The Indian government has removed the restriction on foreign direct investment in Air India.

(snip)

It is almost certain that the Tata-Singapore Airlines will now enter the fray. Will it be through Vistara or will they float another entity?

IndiGo 6E is the only carrier that has expressed interest in AI but it wants only the international ops.

(snip)

Will the government realise the best value and split up AI and sell it?

Do you see any of the MEB3 (EK EY QR) seizing on this opportunity?

What about Spicejet? Do you see them tying with a business house or foreign fund to bid?

Pertinent details: Only Indigo was willing to put in money under the prior rules.

EK doesn't have the funds to buy AI. EY is such a mess, I doubt they will do anything. QR might bid.
I see Tata/Singapore and Indigo (limited bid) as the most likely contenders.

This will be interesting to watch. I expect many delays. But at the rate Air India is losing money, I expect a resolution just because the GoI must invest their resources elsewhere.

Lightsaber
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.
 
upwardfacing
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Re: Air India Privatization by June

Wed Jan 10, 2018 9:09 pm

Here is a Reuters Breakingviews piece suggesting that privatisation--in general, across industries--is becoming less and less of a taboo in India, and more likely in the coming years:

https://www.breakingviews.com/features/ ... -in-india/

There are some participants here who actually have informed, sophisticated opinions on the state of affairs in India right now. I am thinking of BawliBooch or BLRAviationfor example. It would be helpful if they can offer their assessments of what is likely to happen, and when.
 
dtw2hyd
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Re: Air India Privatization by June

Wed Jan 10, 2018 9:30 pm

49% FDI in AI is a dubious idea by Modi to show-off Davos Economic Summit. If they are sincere 100% FDI should be allowed like other private airlines.

When Indigo expressed intent in writing in June 2017, GoI should have opened their books and allowed Indigo team to start due diligence. Who is going to believe GoI hired consultant's evaluation. Last time some consultant assessed values, five 77Ls were AOG for two years.
 
Planesmart
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Re: Air India Privatization by June

Wed Jan 10, 2018 9:35 pm

dtw2hyd wrote:
Well, Tatas are looking for a front-loaded bailout AKA debt write off, continued sovereign guarantees on av asset debt and even possible rest of the bailout.

Right now Air India pays 3%-5% (some of the best rates in the world) on aircraft lease/finance. Do you think any lender will offer same to Tatas.

We don't always agree, but this time................

Many moons ago, I was working with a global financial consultancy firm hired to produce a re-organisation plan (Government sponsored).

Couldn't even reach consensus on the Terms of Reference, let alone debt, slots, financing, shareholding, leases, protection, golden share, infrastructure ownership, redundancies......

In the intervening period, it's become more complex, because there is more competition, debt has grown, and the stakes have become higher.

Sale in five months is impossible, unless the Government accepts discounted fair market value for all assets, and forgives any debt over this amount. Even this requires legislation changes.

If the Government supports a local purchase, they are going to wind up with increased financial exposure, and less control. Everyone wants a sweet deal to acquire a lemon with potential to become lemonade honey.

Ideally, you want a foreign buyer. If successful, you influence through golden shares. If unsuccessful, you pick up the pieces at significantly lower cost.

Who would have the capability? Too high risk for the US3. CN3 (ultimately Chinese government) would have the appetite and access to funding, but do they have the management? EU3? IAG and LH could be starters. ME3? ET priority merging with EK, but............ A project for STC?
 
vadodara
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Re: Air India Privatization by June

Thu Jan 11, 2018 12:57 am

There is 1 principal issue with Air India.

19000 employees most of whom are not pilots, mechanics, baggage handlers or flt attendants.

There is another issue. Under union contracts, these guys are entitled to freebies, e.g. several free flights * # of family members.

No company, Indian or foreign wants this.

Add to this is the notional emotion of ‘National Carrier’.

This has nothing to do with Davos; it has to do with 45k crores that could have been enough to buy out the S side of Santa Cruz airport and build a 2nd runway there.

Needless to say there are political parties who have a big advantage in maintaining this status quo.
 
vadodara
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Re: Air India Privatization by June

Thu Jan 11, 2018 12:59 am

Another thing. The market share of AI is <20%.

The best thing that the unions can do is to go on strike and they will do a big favor by clearing the congestion at BOM.
 
vadodara
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:00 am

dtw2hyd wrote:
vadodara wrote:
Atleast they are not on govt. money.

However, in your book, everyone other than Air India is a dud. Or am I missing something?


Well, Tatas are looking for a front-loaded bailout AKA debt write off, continued sovereign guarantees on av asset debt and even possible rest of the bailout.

Right now Air India pays 3%-5% (some of the best rates in the world) on aircraft lease/finance. Do you think any lender will offer same to Tatas.

Show me one post where I am against A privatization, all I am saying sell it to someone with money, talent, and motive. Tatas lack all three.


That is Tata’s Problem; not GOI’s.
 
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lightsaber
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:42 am

What is AI's international market share (in passenger quantities, revenue, or RPK) from India? That is the only value. The domestic airline operations do not have costs in line to compete and would pull down the value of any offer. It is my understanding the early were no bidders for the domestic operations...

vadodara wrote:
dtw2hyd wrote:
vadodara wrote:
Atleast they are not on govt. money.

However, in your book, everyone other than Air India is a dud. Or am I missing something?


Well, Tatas are looking for a front-loaded bailout AKA debt write off, continued sovereign guarantees on av asset debt and even possible rest of the bailout.

Right now Air India pays 3%-5% (some of the best rates in the world) on aircraft lease/finance. Do you think any lender will offer same to Tatas.

Show me one post where I am against A privatization, all I am saying sell it to someone with money, talent, and motive. Tatas lack all three.


That is Tata’s Problem; not GOI’s.

When privatized, any buyer will have a good understanding of what rates they expect to borrow money at. If AI is now getting a below market rates, the sales price and debt forgiven will be adjusted.

I'm trying to figure out how Indigo's offer will be topped. In my opinion, the delay has cost the GoI/people of India a few billion USD as the value of AI is dropping and the debt is climbing.

The fact so much foreign money is now being allowed that the GoI needs the money.

Lightsaber
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.
 
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BawliBooch
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Re: Air India Privatization by June

Thu Jan 11, 2018 2:53 am

It is too early to tell either ways. I see this as a desperate attempt by Modi to reclaim the "reformer" tag that has been severely eroded post disasters like Demonetisation & GST as well as win over corporate cronies who are slipping away. There are rumors of Ambani atleast switching sides. This decline has to be arrested. Hence the attempt to jump back on the "reforms" bandwagon - atleast what passes as reform.

But here is why I would hold my cards on the AI privatisation talk. If AI slips out of Govt control, atleast 3 HUGE PSU banks will fail within 6 months. Can a Govt on the defensive afford the failure of 3 big banks just before the 2019 elections? Here is what many just dont get - Air India is more than just an airline. It is a complex cash rotation scheme that keeps our PSU banks afloat. It is also an instrument of state policy.

Even if Air India is split-apart and sold off piecemeal to cronies, i am willing to bet the Govt will have to setup another state-owned airline from scratch. Think of Srilankan-Mihin Lanka saga in neighbouring Sri Lanka. Its the same dynamics at work.

The most practical solution would be restructure AI's debt to reduce the interest burden (will cost the taxpayer less than the Govt taking over the complete debt before selling off), place the airline under the control of an autonomous management for 5 years and THEN reduce the govt stake to 49% with a public listing. The Govt can recover a substantial chunk of its investment.

But with this approach, cronies like Ajay Singh (SpiceJet) and the Bhatia-Gangwal's wont be able to get their slimy hands on public assets for a dime.
L' Esprit de Mai 68
 
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BawliBooch
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Re: Air India Privatization by June

Thu Jan 11, 2018 3:07 am

Should Air India be sold off in a hurry? Of course not! But can Air India be sold off next year? Sure there is a way!

The most practical way is to split off the Air India assets - give Ajay Singh(SpiceJet) the International operations along with the slots. Give the Bhatia-Gangwal's AI's engine workshops & Training Establishments. Split off Air India Express and rename it "INDIAN AIRLINES" which will be the state-owned airline. The reborn 'Indian Airlines' can expand domestically with their fleet of 737-800's on a fresh note and allow the Govt to retain a key instrument of state policy. Cronies rewarded. Reformer image refurbished. Govt remains in Aviation business. WIN, WIN & WIN!

If Jaitley was the one driving it, this most sensible option would have been the approach. But unfortunately it will be a sound & light show with a big announcement, a spectacle on national television and a PR campaign to whitewash the disaster - much like what we saw with Demonetisation & GST.
L' Esprit de Mai 68
 
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unrave
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Re: Air India Privatization by June

Thu Jan 11, 2018 10:22 am

The proposal above is actually more hare brained than the ones put forth by governments past and present. Why will govt continue to own Air India Express when it has a stated objective of exiting the aviation business completely. Economists of the JNU school of thought have done enough damage to the country.

Domestic expansion is a lost cause - India has several carriers that can pick up the slack in capacity if Air India were to fold tomorrow.
Air India is a national embarrassment
 
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Spiderguy252
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Re: Air India Privatization by June

Thu Jan 11, 2018 11:15 am

PPVRA wrote:
We got lucky in Brazil that our government didn't step in to save those airlines. We started again with a clean slate and we're much better off for it.


Elaborate? What did Brazil do differently than the likes of India or Italy?
Vahroone
 
vahancrazy
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Re: Air India Privatization by June

Thu Jan 11, 2018 11:40 am

my popcorns are ready! Who will be the first to be privatised: AZ or AI?
 
dtw2hyd
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Re: Air India Privatization by June

Thu Jan 11, 2018 12:17 pm

unrave wrote:
Domestic expansion is a lost cause - India has several carriers that can pick up the slack in capacity if Air India were to fold tomorrow.


International market share
AI 16.6%,
9W 14.2,
EK 9.9,
EY-5+,
QR 3.9,
6E-3.5,
Oman-2%

With a paltry 3.5% market share is international expansion a lost cause for Indigo?

AI didn't buy a single NB between 2006 and 2016, because it was struggling to finance all the unnecessary WBs parent ordered. It was living with double bogie classics and all the issues come with those.

US3 has individual domestic market shares between 14%-18%.
US4(including WN) has total domestic market share 80%
It is considered an oligopoly.

6E has 41% and India looking to increase it more? Want others to fold?
 
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unrave
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Re: Air India Privatization by June

Thu Jan 11, 2018 12:38 pm

Precisely my point. Private air carriers have several 100 aircraft on order to grow their domestic operations. Cost structure of AI is simply too high to compete with the private carriers.
Air India is a national embarrassment
 
dtw2hyd
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:27 pm

6E has a bloated workforce than AI, ie., without any significant international operations, engineering or ground handling.

Engineering
----------------
AIESL has
Asia's largest MRO network
31 hangars at 6 MRO locations
65 line MX stations in India

Heavy checks for 9W
Maintenance contract with Spicejet

Line MX at Sharjah
Signed a MoU with SIA Engineering
Managing MRO project at DWC for Haveus Aerotech.

In contrast
Indigo sends its planes to Sri Lanka for any repairs


Ground handling
----------------------
AIATSL handles 67,000 flights for AI and 26,000 flights for 30 foreign carriers in a year

----------------------------------------
6E is a pioneer in manhandling passengers, not sure it is because of founder's roots or FA DPRK agent like uniforms causing this.

http://www.india.com/news/india/parliam ... f-2829175/
 
BLRAviation
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Re: Govt. allows 49% FDI in Air India

Thu Jan 11, 2018 1:28 pm

vadodara wrote:
Yes, slots at BOM are potentially very valuable. Perhaps not for 6E but likes of Vistara and Spice Jet.

In addition, Air India Express is a ST bus to gulf. Prime market for Air Asia. Only issue is the obsolete fleet. However, these opportunities come only once in a while. I suspect they may jump.

The government would prefer to sell AI in one go to one buyer. But may not realise the best price. If IndiGo buys international ops and I am assuming AIX also, then what will 6E do? Just use the slots? What about the B738 fleet? Or would it operate AIX as a separate entity. Its profit making, so don't touch it for now.

In which case, Vistara will happily take the domestic part of AIX. In any case there is synergy on the engineering and AI-SATS side.

If the Tatas buy the entire lot, then it becomes interesting. AIX can go to I5 which in turn will connect FD and AX Gulf passengers over India. Again, what about the 738 fleet.

Lots of interesting possibilities come up. :)
I am on Twitter @BLRAviation
 
727200
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:36 pm

From a strictly business standpoint: tell me again why any investor would even look at a prospectus from a company, who by their own admission, only made money on two routes world-wide?
 
dtw2hyd
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:40 pm

BawliBooch wrote:
There are rumors of Ambani atleast switching sides..


Interesting. Can you post more details on the non-av forum?
 
BLRAviation
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:57 pm

upwardfacing wrote:
There are some participants here who actually have informed, sophisticated opinions on the state of affairs in India right now. I am thinking of BawliBooch or BLRAviation for example. It would be helpful if they can offer their assessments of what is likely to happen, and when.


Thanks for the vote of confidence.

Yes, for sure there is a general wave in the country towards wasteful expenditure, but also tempered by the selfishness of "only when the benefits do not derive to me".

Despite all outward appearances, Modi is a socialist. Aviation has never been high on his agenda as it is transport of the "elite". Had Modi been really pragmatic about civil aviation and its critical role in the economy, you would see one of the dynamic ministers like Nitin Gadkari, Piyush Goyal, Suresh Prabhu, etc. handling the ministry. Not the soft-spoken and "watching things happen" Ashok Gajapathi Raju. Jayant Sinha has his pet UDAN project and is content flogging it.

Modi also faces a hurdle in the Rajya Sabha, the upper house of Parliament, where the NDA does not have an outright majority (the first in 34 years of Indian elections).

How will the sale of Air India be negotiated through the upper house remains to be seen. In a country that is quite left leaning, and surpasses even China when it comes to "workers' rights", the thoughts and concerns expressed by many A.netters on how the buyer will handle the labour, remains to be seen.

We can look back at recent history and see how the airport workers were handled when BOM and DEL were handed over to private consortiums, and the Tatas are adept at handling large groups of workers. Expect a mixed approach of payouts via a retirement scheme, or absorption in to one of the many Tata companies, or termination.

With aviation being our passion, naturally AI divestment occupies a high priority for us. But there are serious macro-economic and fiscal issues staring the government. All these years Modi happily increased taxes on fuel to fund the social welfare programs. But now that fuel prices are rising, Jaitley's options are limited. The government also needs upwards of $1.3 trillion to re-capitalise the state-owned banks who have been extending now defunct loans to political cronies. The agriculture sector is in serious recession and this stagnates the buying power of the country which in turn drives down manufacturing and GDP growth. GST collection has crashed severely. Where is the income for Jaitley to offer a populist budget with goodies for the politically powerful farmers?

The rush to get rid of AI, is the 2019 elections. Modi has already expended a lot of political capital on GST and de-monetisation. The second half of 2018 onwards, the BJP and more importantly its allies will not spend any more political capital on AI privatisation, it is too small an issue. If by a slim chance, the AI sale does not occur by mid or maximum 3Q (calendar) of 2018, then in my humble it will not happen.

Just my two cents worth. Thanks for the read.
I am on Twitter @BLRAviation
 
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unrave
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Re: Air India Privatization by June

Thu Jan 11, 2018 1:59 pm

dtw2hyd wrote:
6E has a bloated workforce than AI, ie., without any significant international operations, engineering or ground handling.


Are you really claiming that AI is a well run profitable airline?
Air India is a national embarrassment
 
BLRAviation
Posts: 510
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Re: Air India Privatization by June

Thu Jan 11, 2018 2:04 pm

dtw2hyd wrote:
49% FDI in AI is a dubious idea by Modi to show-off Davos Economic Summit. If they are sincere 100% FDI should be allowed like other private airlines.

When Indigo expressed intent in writing in June 2017, GoI should have opened their books and allowed Indigo team to start due diligence. Who is going to believe GoI hired consultant's evaluation. Last time some consultant assessed values, five 77Ls were AOG for two years.


That 100% FDI is just talk. Aviation FDI is via "approval" route not automatic route. There are a multitude of reasons there is no way the sale of AI can occur to a majority foreign owned entity. Apart from the political storm, it will fail the SEOC rules of ICAO. And why should India offer 100% foreign ownership? US is 25%. I think Japan is 33%. EU is 49% non-EU. There is no need for India to cut its nose to exhibit anything to the world.

Please see the companies / firms selected to advise for the sale of AI. It is none of the usual like KPMG and CAPA who feed from all troughs.
I am on Twitter @BLRAviation
 
BLRAviation
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Re: Air India Privatization by June

Thu Jan 11, 2018 2:16 pm

dtw2hyd wrote:
Well, Tatas are looking for a front-loaded bailout AKA debt write off, continued sovereign guarantees on av asset debt and even possible rest of the bailout.


There is no person on this planet who will touch Air India without a debt write-off. Even Japan Airlines did it the same way. Almost 5 years ago on the sidelines of MH joining oneworld, the then Chairman of JL, and the man credited with turning it around, Masaru Onishi, gave advice for rescuing AI. Unfortunately a.net rules prevent me from posting a link so please visit Bangalore Aviation and look up the article titled “Start from scratch”, Japan Airlines’ Chairman’s advice for Air India (and if someone can post the link on a.net, it is great reading).

dtw2hyd wrote:
Right now Air India pays 3%-5% (some of the best rates in the world) on aircraft lease/finance. Do you think any lender will offer same to Tatas.


Combination of two factors, but majority that the US EXIM bank is financing and India is extending a sovereign guarantee. The guarantee does reduce lease rates a lot. I expect any buyer to condition that existing financial agreements be continued (where beneficial to the buyer). Future procurement will be probably on the buyer's terms and credibility.

dtw2hyd wrote:
Show me one post where I am against A privatization, all I am saying sell it to someone with money, talent, and motive. Tatas lack all three.


Ahem. If anything, it is the motive that is driving the Tatas to AI. For this emotional long-lost child, money will be raised. The operational talent will come from SQ. The talent of "managing" the government, MoCA, etc. will come from the vast Tata Administrative Service. :)
I am on Twitter @BLRAviation
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