The Indian government is set to move forward with plans to divest the flag carrier Air India by exiting the company, including in units Air India Express (AIXL) and Air India SATS (AISATS).
Ernst & Young is to take charge of the transaction, with a timeline of March 17 to submit the expression of interest (EoI) document, and March 31 to intimate the qualified bidders.
“The GoI has given an ‘in-principle’ approval for the strategic disinvestment of Air India by way of transfer of management control and sale of 100 percent equity share capital of AI held by GoI, which will include AI’s shareholding interest of 100 percent in AIXL and 50 percent in AISATS,” the EoI document released on January 27 stated.
A successful sale of Air India is required of the government to meet its disinvestment target. Moreover the airline, which is dependent on government largesse to run its operations, needs a new owner to keep flying.
The national carrier, whose net loss in FY19 had risen to Rs 8,556 crore from Rs 5,348 crore in the preceding year, has total liabilities of over Rs 52,000 crore. To attract additional suitors this time, the government has already parked nearly Rs 30,000 crore of debts and liabilities in a special purpose vehicle (SPV).
The new owner of the airline will be left with only Rs 23,286 crore worth of debt, taken mainly for aircraft purchases and currently secured against government guarantees. The guarantees will lapse once the new buyer takes over.
While AIXL is the profitable low-cost arm of Air India, which flies to short haul international destinations, AISATS is a joint venture that provides ground and cargo handling services. The Centre holds 50 percent stake in AISATS.
