Who will bell this cat?

'Jewel of our nation' Air India is finally on the block but the actual sale may be more difficult than we think

Last week, the ministry of civil aviation finally invited expressions of interest from companies interested in acquiring 76 per cent stake in national carrier Air India. This is without doubt a moment to be celebrated. I hadn’t really thought any government would actually try and sell the carrier while I was still writing on this subject. This therefore comes as a happy surprise.

One thing that struck me is that I alone seem to be celebrating. The announcement in general has been greeted by silence. I don’t see any player or potential bidder jumping in joy and listing the potential gains they see from such a buy. Only the newspapers have speculated on who could gain what from buying Air India. Of course, this could be and I hope is tactical.

This too could be tactical but a few possible bidders and industry experts pooh-poohed the whole exercise and listed for me all the negatives. Those who managed to read through the dull 200 pages that comprise the expression of interest document say that too much debt has been left on the books to be dealt with. Even if one assumes the airline makes a smart recovery, servicing this kind of debt would be a Herculean task. Had the government taken away all debt except aircraft related, chances of a sale would be brighter. Of course, a point to be kept in mind here is that almost all the Indian airlines usually have both aircraft and working capital debt on their books — barring perhaps IndiGo.

In addition, the skeptics say that the airline apparently has many contingent or potential liabilities that have not been accounted for. So they argue that what a buyer may have to shell out may be larger than anticipated.

A clause to protect 11,000-odd permanent employees is being described by many as “irksome”. And here I’d like to say that to me this is the single biggest liability: the typical Air India staffer. Not the numbers but the attitude is what would give me the jitters. 

The government being out of the picture is of course very welcome except in one case. Most of the current debt of the airline is backed by sovereign guarantees and it is not clear what happens to that. Will the buyer have to shell out the margin money? Will the interest rates and therefore the yearly outgo on the debt rise?

But the government is not as “out” as they’d like either. While 24 per cent doesn’t allow you to block major resolutions and decisions, it does allow you to poke your nose and this nose is being likened to Pinocchio’s! As one industry source put it to me, 24 per cent held by someone and 24 per cent held by the government are two very different things.

Of course as I said a lot of this could be posturing and maybe behind closed doors, those who are really excited are keeping a lid on their feelings. But I’d like to say one or two things. One, till this sale happens, a lot of things will be in limbo and that’s bad news for everyone. Vistara and IndiGo have both announced long haul plans but I don’t expect them to make any concrete moves while this elephant is still in the room. This could mean a delay in their plans and doesn’t augur well for the passengers or the industry. One, getting seats out of India have become a challenge any given month. In the absence of Indian players, all this growth is being captured by Emirates, Qatar Airways, Singapore Airlines and so on — all except Indian players — a loss to the country.

Two, I’m grateful that I am not the person signing on the final dotted line. No matter what price the airline is sold at, the transaction will be scrutinised with a fine-tooth comb. An expert at putting the cart before the horse, Subramanian Swamy — god bless his troubled soul — has already questioned the why and why not of the sale.

Meanwhile, if anyone needs any further convincing on sale being the only logical way ahead, let’s take stock of some of the mad and merry recent decisions of the airline management. A direct flight from Delhi to Tel Aviv after a visit from the Israeli Prime Minister. A hiring spree for cabin crew and pilots and a recent increase in pilot salaries — all when you know you are soon to be sold off. If we don’t bell this cat, at Air India, it will be business as usual.