Senior officials reveal that the government may prefer that an airline acquires Air India, even if it leads to selling domestic and international operations separately. “We also want continuity for the existing staff which could only happen if it is being taken over by another airline,” one of them said. Along with IndiGo, which is interested in its international business, there are talks of a group of private equity investors eyeing a possible stake-off process. Tata Group is also said to be a possible suitor.
The key burden for any investor in Air India would be its £5 billion debt. About £3.3 billion of this is on account of working capital loans. Its annual interest outgo of £450 million is about 21 per cent of turnover. The government is considering an option where interested parties may make part payment upfront to the government. An acquirer would then take over the remaining debt, which would be restructured by lenders based on a viability plan. “Such a move will ensure that the debt portion may be reduced but also give the selected bidder time to turn around the firm,” the official said. The administration has approved the recommendations of Niti Aayog on strategic disinvestment of Air India and five of its subsidiaries based on inputs of core group of secretaries on disinvestment.
A panel led by Finance Minister Arun Jaitley is looking at ways of divesting the government's stake in the carrier. The panel is to submit its report in six months. It makes sense to let strategic investors who understand the airline business to bid for Air India.
The national carrier's debt is huge. So the government will have to choose a bidder who is able to take on the largest amount of debt in order to minimise the government's payout.
