Since the deal required taking on 66% of the airline’s $7.8bn in debt to get 76% of the company, the lack of excitement is understandable. Moreover, it is not clear that the buyer could layoff the thousands of people on the payroll the airline does not need.
Last year we speculated the privatization might not occur. Count us not surprised by the latest news.
Indeed, a search on our site reveals several stories about the airline. None of which are especially positive.
The Indian government now has to go back and rework its offering. Any progress must, in our view, include unbundling assets. For example, the government might consider taking the airline’s large real estate portfolio and hive that off separately. Clearly, the buyer needs to have free reign in staffing levels. And, of course, that debt has to be taken on by the government itself. The debt is artificial because it was created to support the staffing and votes. The buyer probably won’t be running for office, so the votes don’t matter.