Two Air India planes parked at Mumbai airport. Photo: Reuters
Two Air India planes parked at Mumbai airport. Photo: Reuters

After its ambitious plan to privatize state-owned Air India failed to attract investor interest, the Indian government is to revise its approach to the proposed sale.

The deadline to show preliminary interest expired on Thursday without any bids being made for the 76% stake in Air India Ltd. Bidders would have had to take on US$5 billion debt.

Up for offer are Air India, its low cost arm Air India Express and Air India SATS Airport Services Pvt Ltd. The latter is a joint venture between the national carrier and Singapore-based SATS Ltd. Under the terms of the bidding process, the winning bidder was required to retain its investment in the airline for at least three years.

Economic Affairs Secretary Subhash Chandra Garg has said the government will make the necessary changes to bidding terms. When the bidding deadline passed, Aviation Secretary R.N. Choubey announced that the process for the next steps in the sale will start in two weeks, Bloomberg reported.

The matter will now revert back to the government’s core group on disinvestment, which will rule on any changes in the terms of sale.

Industry sources say the government’s decision to retain a 24% stake in the airline was behind the absence of bids. India’s largest airline, IndiGo, while expressing an interest in acquiring Air India, has said it would not bid so long as the government remained in the picture, Business Standard reported.

The government’s insistence that it would not split the ailing airline into parts also discouraged IndiGo, which was reportedly interested only in Air India’s overseas operation.

Air India operates a fleet of 142 aircraft including 65 Airbus 320s, 15 Boeing 777s and 24 Boeing 787s. The carrier also enjoys some of the most lucrative international and domestic landing and parking slots. However, the potential buyer will also have to contend with the airline industry’s highest employees-per-aircraft ratio. Air India has 27,000 employees, 40% of whom are permanent staff.

Selling the state carrier is key to Narendra Modi government’s plans to divest assets and help keep the fiscal deficit at 3.3% of GDP, a goal already under pressure ahead of the 2019 national election.