An Air India jet taxis on the runway. (Photographer: Suzanne Plunkett/Bloomberg News)

Modi Government to Review Air India Deal After Sale Plan Flops

(Bloomberg) -- Prime Minister Narendra Modi’s government will review plans to sell Air India after his administration’s most high-profile privatization offer ended in a whimper with no buyers showing interest in the unprofitable flag carrier.

The government will make changes to the plan, if needed, Economic Affairs Secretary Subhash Chandra Garg said. As the deadline to show preliminary interest expired Thursday, no bidder came forward to propose purchasing 76 percent of Air India Ltd., which was offered along with $5 billion debt, Aviation Secretary R.N. Choubey told reporters in New Delhi. The process for the next steps will start in two weeks, he said.

“We were certainly looking forward to better participation than this,” he said.

The failure is a setback to Modi’s reformist image ahead of national elections due next year. In the past two decades, Air India lost out to carriers such as Singapore Airlines Ltd. and Emirates that expanded flights to India, the world’s fastest-growing major aviation market. The lack of interest also means the government is stuck with an enterprise that has survived on taxpayer money for the past decade.

To read about the headwinds Air India sale faced, click here.

Interested parties balked at the terms when the government made it clear that it didn’t wish to sell Air India in parts. IndiGo, the nation’s biggest airline and an early suitor, pulled out in April this year. Some media had reported that Singapore Air, Qatar Airways and conglomerate Tata Group were potential bidders, but in the end none showed up.

Air India’s fleet includes more than 100 Boeing Co. and Airbus SE aircraft that make more than 2,300 local flights weekly to 54 airports. It has 2,543 landing slots at airports including New York, London, Paris and Tokyo.

India’s government had tried to sell the carrier previously as well and those efforts were stopped after political opposition.

In 2001, Singapore Air dropped its bid for a stake in Air India, citing political opposition as one of the reasons. The Southeast Asian carrier was seeking a 40 percent stake with India’s Tata Group.

©2018 Bloomberg L.P.

Watch this conversation with aviation expert Amrit Pandurangi and founder of IndiaSpend and Boom, Govind Ethiraj on what the government can do to attract bidders for Air India.

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