Govt Offers 76% Stake In Air India To Private Bidders

The Logical Indian Crew

March 29th, 2018

Courtesy: Bloomberg Quint | Image Credits: Wikimedia

Debt-ridden Air India is all set for bidding as the government plans to sell 76% stake in the national carrier to private bidders. The government has taken steps towards disinvesting the airline running for years on taxpayers’ money.

Of the airline’s total debt of Rs 48,700 crore, Rs 33,390 crore debt will remain with Air India and will have to be absorbed by the potential buyer. The balance debt will be allocated to a government holding company, reports Bloomberg Quint.

According to the preliminary information memorandum released by the Civil Aviation Ministry, Expression of Interest (EoI) has been released for the stake sale in Air India along with two of its subsidiaries, Air India Express and Air India SATS Airport Services Pvt Ltd which is an equal joint venture between the national carrier and Singapore-based SATS Ltd. The ministry plans to transfer control of the management along with 76% equity.

For the strategic disinvestment process multinational consultancy firm, Ernst & Young LLP India, has been appointed as transaction adviser. The disinvestment will be done through open competitive bidding. As mentioned in the memorandum, management or employees can participate directly or by way of forming a consortium. May 14 is the last date for expressing interest and bidders shortlisted will be intimated by May 28.

Rs 50 billion is minimum net worth required to bid for Air India. After the decision, the Air India Specific Alternative Mechanism (AISAM), headed by Finance Minister Arun Jaitley, was set up to decide on specific issues.

Previously, the government put the decision on hold until 2022 when the 10-year turnaround plan ends. As of December 2017, Air India had a fleet of 115 aircraft and served around 39 international destinations. It has a workforce of 11,214 permanent employees and 2,913 on contract, among others. For years the debt-ridden national carrier is being supported by public money under a government turnaround plan sanctioned by the Centre in 2012. Rs 30,231 crore is set to receive by the Air India as part of the plan over a ten-year period but on meeting certain performance parameters. Air India incurred a net loss of Rs 3,643 crore during 2016-17, as reported in provisional data released by the civil aviation ministry.

For the 2018-19 Union Budget, a sum of Rs 650 crore to Air India was allocated by the ministry of finance under the turnaround plan. More than Rs 26,000 crore has already been received by the airline under the package.

Since its historic merger with state-owned domestic operator Indian Airlines Ltd in 2007, Air India has been under losses. However, in March 2017, the airline reported an operating profit of about Rs 3 billion which it managed to secure due to sharp fall in oil prices.

The airline had a debt of nearly Rs 49,000 crores which is expected to go up by another Rs. 3,500 crore by the end of the current financial year. As per the memorandum, four other subsidiaries of the airline AIESL (Air India Engineering Services Ltd), AIATSL (Air India Air Transport Services Ltd), HCI (Hotel Corporation of India) and AASL (Airline Allied Services Ltd) would be sorted off through other appropriate mechanisms like demerger.

 

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