Air India won't stay with Air Indians after all
The consortium of employees bidding for Air India has been disqualified from participating in the disinvestment process
The employee bid for national carrier Air India that was announced amid much fanfare has turned out to be a damp squib.
The consortium of Air India employees under the company's commercial director Meenakshi Mallik had bid to ensure that Air India remained with Air Indians. However, the employees have been informed by the government-appointed transaction advisor EY that they have been disqualified owing to non-fulfilment of certain eligibility requirements, The Economic Times reported.
“The EoI and the supporting documents submitted by you have been duly evaluated and have been found to not fulfil the eligibility requirements set out in the Preliminary Information Memorandum (as amended)(PIM) issued in respect of the strategic disinvestment of Air India Limited (AI) and is liable for disqualification, including on account of: (A) non-submission of required three years audited financial statements for foreign consortium member...; (B) non-submission of information or details by IB... for investments in offshore companies, which form substantial part of net worth of foreign consortium member...; and (C) the foreign consortium member not being an appropriately regulated foreign investment fund as defined in the PIM,” Mallik informed employees in an email on March 8 quoting EY.
However, she expressed a "great sense of pride and admiration for the sincerest efforts we have made over the last few months together", according to a Moneycontrol report.
The employee consortium was not shortlisted for participating in the second stage of the bidding under which the eligible bidders would be asked for a request for proposal (RFP), which is nothing but financial bids.
The Air India privatisation bid had attracted multiple expressions of interest. Image courtesy: Facebook/Air India
Plane Vanilla had reported in December last year that the consortium of over 200 Air India employees had submitted an expression of interest (EoI) for the ailing carrier in partnership with a fund based in Seychelles.
This was in line with the government's suggestion of a concept whereby the Air India employees could bid for the airline themselves and be a part of the management (or) the ownership structure of the company.
However, since the employees lacked the necessary financial wherewithal, they were allowed to partner with a financial entity, like a fund, or a bank, or a venture capital for the required funding.
Employees from all levels were involved in the bid and the consortium planned to take up at least a 51% stake in the company.
The employee bid for the airline, however, faced some turbulence with two prominent Air India unions directing the pilots of the national carrier not to take part in the bids. The Indian Commercial Pilots Association (ICPA) and the Indian Pilots Guild (IPG), representing the Air India pilots flying narrow-body and wide-body planes respectively cited "disproportionate 70% pay cut for pilots vis-a-vis Air India's top management officials (10%)" and "no clarity on the payment of the illegally withheld 25% arrears due to the pilots" for their directive.
Also, the All India Cabin Crew Association (AICCA), in a letter to Air India Chairman and Managing Director Rajiv Bansal, flagged the issue of over Rs 1,400 crore of employee arrears outstanding and said that the cabin crew would not be taking part in the bids.
The debt-ridden national carrier was put on sale on January 27, 2020, after two failed attempts -- one in 2000 and the other in 2018. The government came up with a sweetened deal this time around, offering to give up management control and offload its entire stake in Air India and its low-cost arm Air India Express along with its 50% stake in the ground-handling unit AISATS.
According to the PIM floated by DIPAM in January last year, the buyer would have to absorb Rs 23,286.5 crore, or around one-third of the airline's total debt, while the rest would be transferred to the Air India Assets Holding Ltd (AIAHL) -- a special purpose vehicle.
The minimum net worth criterion for potential bidders was also relaxed to Rs 3,500 crore from Rs 5,000 crore in 2018.
Owing to Covid-induced uncertainties, the initial deadline of March 17, 2020, for receiving preliminary bids was pushed first to June 30, then to August 31, then again to October 30, and finally to December 14. Diluting the deal terms even further, the government allowed bidding on the enterprise value of the carrier instead of the equity value, giving the bidders the option to decide on how much debt they want to absorb and the cost they would pay for the carrier.
According to the Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey, there were "multiple expressions of interest" for the national carrier on December 14. However, the disinvestment process has continued to get stretched, as the government is yet to notify the qualified interested bidders (QIBs). The deadline for doing so, which at first was set at December 28, 2020, was postponed to January 5, 2021. That deadline was extended too. According to a News18 report, the QIBs were to be intimated on January 30, 2021, but the government continues to take its time. A reason for this delay could be the intense scrutiny that the initial bids are going through.
The Tata group, SpiceJet Chairman and Managing Director Ajay Singh in his personal capacity and Kolkata-based businessman Pawan Ruia in his personal capacity are still in the hunt for the national carrier, according to the ET report. US-based fund Interups Inc was reported to have withdrawn from the race earlier.
Air India is estimated to have incurred losses of Rs 9,500-10,000 crore in the financial year 2020-21 -- its highest since the merger with Indian Airlines in 2007, beating the record Rs 8,500 crore loss in 2018-19, The Economic Times reported.
(Cover image courtesy: Wikimedia Commons/John Taggart)