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Wednesday, 29 January, 2020, 13 : 30 PM [IST]

Govt may ease Air India brand retention clause

According to a report in The Business Standard, the bid document for Air India sale says the brand must be retained by the new owner, but the government is likely to be flexible if that clause comes in the way of a good deal, according to sources in the know. If there’s sufficient demand from bidders, the government may relax the mandatory condition of the new owner retaining the Air India brand, officials involved in the sale process said. 

While there have been deliberations within the government on it, the clause was kept with the expectation that some potential bidders may find the Air India brand attractive for their aviation business. “It’s a very famous and globally renowned brand and we expect there will be bidders who would want to retain that. If not, we will decide after looking at the queries,” an official said. Prospective bidders pointed out that if an existing airline bid for Air India, it would ideally want to merge it with its ongoing business. 

“No existing airline will give up a brand on which it spent millions of dollars and earned reputation,” an executive said. Bidders can submit queries till February 11 on the contours of the deal. The government has, in fact, allowed bidders to merge the airline with their own, changing a norm from the last year’s failed sale process. “Merger, amalgamation, or consolidation of Air India with the confirmed selected bidder or the special purpose vehicle in case investment in AI is made through a special purpose vehicle, as the case may be, will be allowed, provided there’s no change in control of the airline,” says a clause in the information memorandum released by the government. 

The clause would help Tata Sons, which operates two airlines — Vistara and AirAsia India. N Chandrasekaran, Chairman, Tata Sons, had earlier told media that if the group bid for the state-owned airline, it would look to merge with an existing airline. “I’m not going to run a third airline in addition to Vistara and AirAsia India,” he had said. In the case of Jet Airways sale too, the clause on retaining its brand name had put off many interested parties last year. Sources involved in the sale process said the clause was included to steer clear of political objection as the Air India brand carries a sentimental value.
“However, we have also clarified that the terms and conditions of the usage will be clarified in the second stage, which means we are open to a relook,” the official said. 

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