Privatisation of Air India: Finding suitors for Maharaja won't be easy

The Modi government looks serious about its plans to privatise Air India. It has constituted a five-member ministerial panel, headed by finance minister Arun Jaitley, to work out the details. However, finding suitors will not be easy. Interglobe Aviation, the company that operates IndiGo, India's most profitable airline, saw its stock price tumble 7.7 per cent over two days on the National Stock Exchange, after its interest became public knowledge. It took a letter from IndiGo president Aditya Ghosh, saying they would not pursue the deal if it did not add value to all stakeholders, to quell investors' fears.

The only attraction, then, is Air India's 25 per cent domestic market share of the international travel segment. For IndiGo, which made a net profit of Rs 1,659 crore in 2016-17, Air India's global portfolio would be a good fit, and allow it to bypass the years it takes to build an international business from scratch.

The airline is waiting to see if the contours of the deal, including critically the offer price, make it a viable purchase. Meanwhile, there's no word yet from the Tata Group, which is also reported to have evinced interest. For Ratan Tata, chairman emeritus, acquiring Air India would mean bringing home family silver - his predecessor, J.R.D. Tata, founded Air India as Tata Airlines in 1932. But the Tata Group, under new chairman N. Chandrasekaran, is already battling financial difficulties, such as loss-making businesses like the Nano car and Corus (now Tata Steel Europe Ltd.), which were made public by ousted chairman Cyrus Mistry.