After IndiGo, Jet Airways not to participate in bid for stake in Air India

After IndiGo, Jet Airways not to participate in bid for stake in Air India

New Delhi, Apr 10: Jet Airways has decided not to participate in the bid for a stake in Air India, further denting the divestment process. The move comes four days after IndiGo’s decision to back out of bidding.
While Jet Airways had never formally announced its interest in Air India, the management had held discussions with its alliance partners Air France-KLM, Delta, and other investors to put up a proposal. But the airline has now decided to call off its efforts.
“We welcome the government move to privatise Air India. It is a bold step. However, considering the terms of offer in the information memorandum and based on our review, we are not participating in the process,” said Jet Airways Deputy Chief Executive Officer Amit Agarwal.
Jet Airways, which returned to profitability in 2015-16 (after eight years), has been working on a plan to pare its debt and cut down on non-fuel cost expenses. According to the information memorandum, debt and current liabilities worth Rs 333 billion will remain with Air India; this is being seen as a major concern by the Jet management.
Jet continues to have negative net worth. As of March 2017, the airline had a negative net worth of Rs 27.5 billion.
While the bid norms would have enabled Jet Airways to participate in the process, it would have been forced to be part of the consortium. Indian airlines not having positive net worth can bid as part of the consortium; their stake would be restricted to 51 per cent.
This would effectively give it 39 per cent control in the airline. The government would hold a 24 per cent stake in Air India.
Air France-KLM and Delta, too, have not been inclined to bid for Air India. The partnership with Jet Airways gives them a firm footing in India and the focus of the airlines is to make the partnership work on India-Europe and India-US routes. Limited scope for synergies with Air India has been another cause for concern.
“Other bid conditions, too, are said to be unfavourable. The government wants the new owner to list Air India in three years, but turning around the airline and making it profitable will not be an easy task,” an expert said.
The government may relax the deadline for bidders for submitting expressions of interest to buy a 76 per cent stake in the state-owned carrier. However, the structure of the deal will remain unchanged, with no plans to split the international and domestic businesses of the airline.
Last week, IndiGo announced it would not bid for Air India under the current sale norms. IndiGo had expressed its desire to acquire Air India’s international operations and its low-cost arm, Air India Express. Also, the airline said it did not have the capability to turn around all of Air India’s operations.