How not to sell a loss making national carrier
There was hardly any element of surprise when the Air India sale did not elicit a single expression of interest (EOI) from potential buyers. It is one thing to get quotes below your expectation and it is another thing not to get any EOI at all. That is exactly what happened to Air India. In fact, Air India is a classic case study on how not to sell a national carrier. Here is why.
What about ownership?
That is the big question that potential investors still have. Why does the government want to retain a 24% stake in Air India and divest only 76%? When Air India is being sold, the first priority should be to bring in private owners. That is only possible if they have 100% control over the company. This approach is understandable when you are looking at a minority stake sale. But in a strategic sale, the idea of selling less than 100% is hard to fathom.
A complex structure, oops
To begin with, the divestment structure is too complex. The whole idea of four different units with different time tables for sale is hard to understand. There are some key areas pertaining to the asset monetization which are really not clear. Buyers are not just interested in getting the airline. They are also looking at the ancillary spill-offs like land and buildings that they can monetize. Unless that is clear, it is hard to take off!
First turn around Air India
What investors really want to do is to buy a stake in a company that shows promise of turning around. Airlines are still a profitable business as Indigo and Spice Jet have proved. The problem with AI is the bad usage of assets and a weak business model that is holding back the performance of the company. The best way the government can manage this shift is to get a professional manager to turnaround the company by giving a free hand. Once there is a clear time table for turning around the company, then investors will get interested. In fact, Anand Mahindra has suggested getting in veterans managers like E Sreedharan (of Delhi Metro fame) who have immense experience in turning around such complex companies. That can be a starting point.
Get stakeholders buy-in
It needs to be remembered that the entire divestment of Air India will predicate on how well the stakeholders are involved in the process. This includes the government, ministry officials, lenders, suppliers, employees, unions etc. This will elicit more interest from potential buyers since there will be a greater probability of this move going through. Losses and debt are the two big challenges for Air India. If they are addressed, it could actually become a case template on strategic sale. Take more time but do it to perfection! ©
