Pawan Hans privatization offers a big turnaround opportunity
Premium- This is the second successful privatization in the domestic civil aviation space in the past six months after Air India was sold to the Tatas in October last year.
On 29 April, the finance ministry announced that the alternative mechanism, empowered by the Cabinet Committee on Economic Affairs, which includes the roads and highways and the civil aviation ministers, has approved the (highest) bid of Star9 Mobility Private Ltd in the sale of government’s entire share ownership of 51% in Pawan Hans Limited (PHL). Government-owned ONGC holds the balance 49% in Pawan Hans which provides helicopter and aero mobility services. It had earlier decided to offer its entire shareholding to the successful bidder identified in the government strategic disinvestment transaction on the same price and terms as the government.
This is the second successful privatization in the domestic civil aviation space in the past six months after Air India was sold to the Tatas in October last year. Star9 Mobility, a three-way consortium of Big Charter Private Limited, Maharaja Aviation Private Limited and Almas Global Opportunity Fund SPC, emerged as the highest bidder quoting ₹211.14 crore, which was above the reserve price.
The government has turned out third-time lucky since PHL’s divestment was first approved in October 2016. It might have taken time to be sold, but PHL’s privatization is good news for more than one reason for it is bound to encourage increased use of helicopters in the country. India’s fleet of about 250 civil helicopters accounts for about 1% of the total global helicopter strength. Contrast India’s 250 with say the Brazilian city of Sao Paulo that alone has 750 choppers. For its new owners, therefore, PHL offers tremendous potential for expanding the helicopter business in India, given it has India’s largest commercial fleet of helicopters at over 40.
PHL’s divestment comes in the backdrop of the government announcing a new helicopter policy last October under which dedicated hubs and corridors are to be established and landing, and parking charges will be abolished to give a further boost to helicopter operations. Besides, earlier this year the government announced that it was working on a policy to boost regional airlines and helicopter operators to help improve last-mile connectivity.
Further, in PHL, Star9 Mobility Private Ltd also gets a ready set of scalable business deals as the state-owned helicopter operator had in place long-term contracts for providing its services to various state governments as well as ONGC. The new owners can also look at new business opportunities like expanding religious tourism, providing medical evacuations and air ambulances, farm and civic amenity services including the spraying and inspection of crops and energy lines apart from providing intracity transport in large cities like the metros where the airports are far from the city centre. The market for such services is ready to be tapped. PHL is well set for the first-mover advantage.
Then there is also the massive election-campaign market that PHL has traditionally served as the preferred mode of transport for VVIPs opting for choppers during campaigning. Unlike a commercial aircraft that can only land at airports, helicopters need only a concrete patch to land, enabling politicians to cover a greater number of constituencies in a day of campaigning.
With one of the three members of the Star9 Mobility Private Ltd consortium also owning flybig, the regional airline, which operates commercial aircraft, the new owners can also look at the opportunity of connecting passengers from one corner of the country to another seamlessly. flybig is set to start commercial flights using a Canadian Q 400 aircraft connecting Delhi to Shillong from 2 May. This opens up the possibility of a passenger from Meghalaya flying to Delhi on flybig, visiting Rajasthan using the privatized PHL’s helicopter, and then returning on the flybig flight back to Shillong.
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The other big advantage the new owners get from buying PHL is that it also has about 600 trained manpower, including pilots and aircraft maintenance engineers. Roughly half are engaged with PHL on a contractual basis.
However, before the new owners can really start reaping the benefits of their new acquisition they will have to invest in equipment, spare parts and look at renegotiating the existing contracts as these were negotiated when PHL was a public sector undertaking. This will involve funds and time. PHL last inducted helicopters around 2010. The market may not be keen to pay for riding helicopters of more than five-year-old vintage. Further, with the helicopter company passing into private hands, it is more than likely that the state governments will want to renegotiate the deals they earlier closed with a public sector enterprise.