The Modi government approved the privatisation of debt-ridden Air India and its five subsidiaries, in one of its boldest reform moves yet. Finance Minister Arun Jaitley, after a Cabinet meeting, said “in-principle approval” for AI's divestment had been secured and now a panel headed by him would decide modalities of the sale. Talking to the media, Jaitley said the Cabinet approval for disinvestment was accorded on the basis of a proposal presented by the civil aviation ministry.
The decision came after the government came around to the view that the financially bleeding airline could serve connectivity goals in private hands. Air India has a debt of over £5.2 billion and is surviving on a £3 billion bailout package extended by the previous UPA government in 2012. “How much will be disinvested, by which process, its assets and debt, as also its hotel companies, will be deliberated.” A panel will decide whether to go for 100 per cent stake sale in one go, or to remain present in the airline for some time and gradually divest ownership. The department of investment and public asset management has given options of 100 per cent, 74 per cent, and 51 percent stake sale in AI.
Founder of AI, Tata Group is seen as a potential bidder. Jaitley-headed “AI-specific alternative mechanism” will decide who can bid for the airline, whether airlines in JV with Indian or foreign partners should be allowed to buy the airline. The current NDA will now examine if such a model can be allowed for AI. The panel will also decide on the treatment of disinvestment of three profit-making subsidiaries. The subsidiaries whose stake sale will be considered, include four wholly-owned ones, AI Engineering Services Ltd, ground handling arm AI Transport Services Ltd, Alliance Air and the low-cost AI Express. The panel will also decide how to make AI attractive enough for bidders. The Maharaja has a working capital loan of £3 billion and £2.2 billion of aircraft purchase loan on its books.
It has over 110 planes in its fleet, including 43 wide-body aircraft, and flies to 41 international and 72 domestic destinations. Its share in domestic and international air travel is 14 per cent and 17 per cent respectively. AI owns real estate across the world, including almost 32 acres in central Mumbai, apart from the Nariman Point headquarters, which is worth over a whopping £160 million.
IndiGo expresses interest: Private airline IndiGo has expressed interest in buying stake in Air India, said Secretary Civil Aviation RN Chaubey, clarifying that offers have also been made informally by other domestic and international airlines. It is unclear if the government would write off any part of the debt.
