People walk past an Air India logo outside its building in Mumbai in January 2020. Photo: AFP / Himanshu Bhatt / NurPhoto

The much-awaited sale of India’s ailing state-owned airline Air India may finally take place by the middle of next month, according to media reports.

The Narendra Modi government is reportedly preparing to announce the winning bid for Air India by October 15, CNBC-TV 18 said. The financial bids for the airline are likely to be opened on September 29.

On September 15, the deadline for the submission of financial bids for Air India ended and the Tata Group was seen as the frontrunner. Low-cost carrier SpiceJet chief Ajay Singh also submitted bids to buy Air India.

There were reports that 85% of the bidding price will be for Air India debt, while 15% will be in cash. Bidders have the flexibility for all-cash deals as well.

If the Tata Group wins, it is likely to integrate Air India with its two airline joint ventures Vistara and Air Asia India. The salt-to-software company owns a 51.49% stake in Vistara, with the rest held by Singapore Airlines, and the group recently increased its stake in Air Asia India to 83.67%.

Tata’s Malaysian partner is looking to exit non-productive markets like India to keep it alive.

There were reports that if the Mumbai-based conglomerate acquires the state-owned airline, AirAsia India may be merged with low-cost unit Air India Express and Singapore Airlines has been persuaded to combine Vistara’s network with that of Air India. The Tata group is considering roping in integration experts to create a single airline entity.

The government invited bids for strategic disinvestment of a 100% stake in the airline. It also included a 100% stake in Air India Express Ltd and a 50% stake in Air India SATS. Set up in 2010, Air India SATS now operates in five airports – Bangalore, New Delhi, Hyderabad, Mangalore and Thiruvananthapuram.

The process was initiated in January last year, but due to the Covid-19 pandemic, the last date for submission of preliminary bids was extended many times.

The Narendra Modi government’s earlier attempt in 2018 to offload a 76% stake in the airline proved to be a non-starter, as there were no takers. Investors were reportedly not comfortable with the government retaining a 24% stake.

The long-pending Air India strategic sale is vital for the Narendra Modi-led government to meet its disinvestment target of 1.75 trillion rupees (US$23.80 billion) this fiscal year. The winner of the bid will take over the beleaguered airline and get control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas.