Air India candidates shortlisted

Air India's hidden, non-aircraft assets make it difficult to value the company

India's government has finalised a shortlist of bidders for the Air India privatisation offering, a senior official said on Monday.

Disinvestment Secretary Pradip Baijal said shortlisted candidates would within two weeks be invited to carry out due diligence on the carrier as the next step in the airline's privatisation.

Privatising Air India

Equity on sale is 60%

Foreign airlines can bid for 26%

Foreign airlines with an Indian partner can bid for 40%

Air India employees will get 10%

Financial institutions will get 10%

Mr Baijal declined to name the bidders but said two to three prospective buyers had been left off the shortlist because they did not meet bid qualifications such as minimum net worth.

Sources close to the deal said the Air India pilots' union was likely to be one of those disqualified from going forward with a bid.

Major players

Remaining candidates for the sale are thought to include several major global aviation players.

Singapore Airlines made a joint bid with India's Tata Group, which owned Air India before it was nationalised in the 1950s.

Air France and the US' Delta Airlines, part of the Sky Team Alliance, are reported to have put in a joint bid for a 26% stake.

Dubai-based Emirates is also thought to be bidding for 26%.

The UK-based Hinduja Group, owned and run by four billionaire Indian-born brothers, is another possible contender.

British Airways and Australia's Qantas teamed up as "advisers" in a consortium including LNM Group, owned by London-based steel magnate LN Mittal, and Kotak Mahindra Finance, which is affiliated to Goldman Sachs.

Rival UK airline Virgin Atlantic decided against a bid.

Hidden assets

Air India, which has a fleet of 23 aircraft and 18,000 staff, is being privatised after nearly five decades of government control.

The Indian government is selling a total of 60% of the airline - of which foreign buyers can bid for 26%, or 40% if they tie-up with an Indian partner.

A further 10% stake will be sold to Air India employees and 10% to financial institutions.

The prospective buyers have so far not been requested to say how much they are prepared to pay for any stake.

Commercial bids will only be made after the due diligence process, when prospective bidders have a chance to examine the company's accounts.

Analysts have resisted putting any valuation on Air India, saying they have insufficient knowledge of the airline's non-aircraft assets, such as real estate and bilateral flying rights.