Under continued government ownership, with no clear roadmap, Air India is likely to see its domestic and international market shares decline over time to a point where the carrier is no longer relevant.

A strategic investment in Air India would have provided the successful bidder with a critical presence in what is forecast to be the world’s fastest growing aviation market for the next couple of decades. The carrier also possesses a significant pool of skilled resources, valuable slots, bilateral entitlements, a well-established brand, and an ideal geographic location for developing an intercontinental hub.

CAPA expected significant interest in Air India, at least at the Expression of Interest stage. So, the fact that not even a single submission was received is very surprising. The outcome can be treated as a significant failure of the divestment process and a sad reflection of the state of Air India.

The Ministry of Civil Aviation has released a document outlining queries received from prospective bidders, in response to the Expression of Interest document for the divestment of Air India. Based on the nature of these questions, three key themes are emerging:

In recent days, both IndiGo and Jet Airways have issued statements advising that they will not be participating in the tender process for the divestment of Air India, pointing to unfavourable terms and conditions in the Expression of Interest (EOI) document. Furthermore, there has been media coverage that TATA/SIA are reportedly losing interest, leading to questions about the prospects for the entire transaction. However, TATA/SIA's position remains pure speculation in the absence of an official statement from the group.

Clean-up the balance sheet: This is the most important first step. The airline can never be viable in its current avatar due to its massive debt and interest burden. The core divestment should consist of the airline operations only, namely Air India, Air India Express and optionally Air India Regional. They should be sold along with aircraft-related debt and reasonable working capital loans.