After a failed attempt last year, the government has invited bids for Air India once again with a sweetened deal. So, how different is this attempt to sell the national carrier compared to the attempt last year?

Last year, the government had only put 76 percent stake on the block.

One of the main hurdles to the divestment process is debt. Last year, the successful bidder had to absorb more than Rs 33,000 crore in debt. This time, it has been reduced by Rs 10,000 crore to just over Rs 23,000 crore. And, the debt burden will be frozen from the date of the expression of interest is made.

Another key deterrent to the sale last time was the employee cost. There was nothing defined on employee stock options. This time, the government has capped it at 3 percent of equity. But, yet again, there is no mention of any voluntary retirement scheme or any other method by which employee strength can be reduced.

The eligibility criteria to bid for the airline has also been eased. The net worth requirement last time was Rs 5,000 crore. That has been brought down to Rs 3,500 crore. With all these changes in rules, will the government be lucky this time?

Former DGCA director general HS Khola told CNBC-TV18: "They have taken out the major debt and now the debt is mainly of the aircraft which are running, which are good aircraft, which are not too old, fairly young aircraft, so that makes it very attractive."

"The other thing is the government is 100 percent out of this, therefore there will be no parliamentary inquiry, there will be no management interference by government and therefore that makes it easier."

"The only thing is about union agreements and I think the unions have now more or less given up on their old agreements, in any case they have to negotiate with the unions."

"I do not know what is the period which has been kept to retain the staff in, what I was told was it is about one year that they will have to keep and after that they can do what they want with them."

Air India already retains about 50 percent of the international market in India, they have 18-19 percent of the domestic market, so it is an attractive proposition and it should sale especially to Gulf Airlines, HS Khola said.

According to him, Air India was created in 1953 when the nationalisation of air transport industry took place. So in 67 years of history of Air India, it has excellent record.

There was a time when people used to feel proud in traveling on Air India. It was the first airline in Asia to introduce Boeing 747 aircraft, so it has a very good history. In earlier days, Air India was making Rs 1 crore profit only on the Gulf route and that was the main earning point for Air India. Now, what has gone wrong, that has to be seen, he added.

Sanat Kaul, former joint secretary at aviation ministry, said: "The terms of reference that have come out today were speculated in the media, so it is on expected lines. I would like to say on record that this is a very big and bold decision and possibly inline with whatever political decisions this government has taken. The write-off that the government will have to take perhaps would be the single biggest write-off that the government would have ever done."

"Second thing that is very important is that they are still open to tweaking it. So, if they get a feedback from investors that they need further changes, I would think that the government would be open to tweaking and making sure that if there is a bit of alignment required on certain issues that will be done. From that perspective it is excellent and there will be a significant move forward."

He added: "There are two things that we need to keep in mind which the government has achieved by this. One is that when you take off such a large debt out, you have unburdened the tax payer which is by assessment what the government should do."

"Second, you will continue to realise the enormous benefit of under a private airline the indirect induced catalytic benefits. So, you continue to generate economic benefits for the economy and unburdening the tax payer. "

According to him, this offer is very attractive and the economic conditions in his assessment are much better than they were last time. So, he expected a significant interest.

He added the clean-up that has been done will attract significant investors.

Another official was also positive on the deal prospects of the national airline.

First Published:Jan 27, 2020 9:42 PM IST