White Elephant

The government is all set to sell the debt-ridden national carrier

A FORCE Report

Government of India owned airline Air India, which has a debt of around Rs 52,000 crore, is likely to be sold by the end of 2018. “From now, we expect it to take six to eight months for the winning bidders to be announced. And then, it will take another few months for the legal closing and the transfer of assets to actually happen,” said the minister of state for civil aviation Jayant Sinha.

White Elephant

Before putting Air India on sale, the government will split it into four separate companies. The core airline business comprising Air India and Air India Express, the low-fare international carrier, will be offered as one company. Ground handling services and engineering operations that will include maintenance, repair and operations (MRO) activities will constitute the other two firms. Alliance Air, which is the regional arm of AI, will be sold off as a separate company.

Officially, only Interglobe Aviation, which runs IndiGo airlines, has expressed its intent to buy the national carrier. The government, on commenting how much of the debt it will absorb, has said that the decisions will be made by the audited mechanism under advice from the transaction advisor.

On January 28, Aviation Secretary R.N. Choubey said that a foreign player has given an ‘unsolicited expression of interest for Air India’s Airline arm’. He did not, however, reveal the identity of the player.

The US-based value investor Mohnish Pabrai, in an interview with news channel ETNow, has said the government will have to be a lot more flexible if it is serious about getting Air India and its huge debt burden off its back.

“The government needs to find the best long-term solution for Air India. It would be better off without the debt woes of Air India”, he said. “The government has to be flexible in Air India sale price, structure and employee management plan.” Parbai also said someone like Singapore Airlines or IndiGo could be the ideal buyers of the public sector carrier.

On 28 June 2017, the Union Cabinet gave its ‘in-principle’ nod to divest Air India. The nod came after a report in early 2017 by the government think-tank NITI Aayog in which an outright sale of the national carrier was recommended.

According to reports, Air India’s privatization was first proposed in 2000 when the National Democratic Alliance (NDA) government decided to sell 51 per cent of equity of the erstwhile domestic airline Indian Airlines, with 26 per cent stake to a strategic partner. It also decided to allow disinvestment of 60 per cent of Air India, which was running international operations, with 26 per cent foreign entity stake. The move was dropped after opposition from the then civil aviation minister Sharad Yadav.


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