“What will be up for sale as part of initial disinvestment are the aircraft, the airline’s prized slots at airports...
across the world, the bilateral rights and its pool of human resource,” a senior civil aviation ministry official was quoted as telling a news agency.
Such a process will help speed up the process of disinvestment, as locating and registering Air India’s vast land pool and real estate would have taken much longer. The Department of Investment and Public Asset Management, the administrative wing for any disinvestment, has suggested a time line of around 10 months for the process, it is learnt.
But, the buyer of Air India will have to take over a certain portion of the working capital debt of the company, another source said.
Of Air India’s total debt of Rs 46,500 crore, around Rs 30,500 crore is on account of working capital; the rest is aircraft loans.
Air India may not club real estate in the proposed deal because many of its land parcels are involved in litigation across various courts, mainly due to irregularity of title deeds, analysts said. In the most recent instance, the City Industrial Development Corporation has refused to hand over 9.50 hectares of land plot allotted to Indian Airlines in Vashi, Navi Mumbai, to Air India since it was left unused.
Air India disinvestment may well be modelled on privatisation of Delhi and Mumbai airports. The high-lease rentals paid by the SPVs - Delhi Indira Gandhi International Airport and Mumbai International Airport are used to compensate the huge losses suffered by Airports Authority of India (AAI) at its smaller airports.
Responding to private airline IndiGo’s interest in acquiring Air India, market analysts have underscored the importance of a faster sale process.
The Centre may not takeover all of Air India’s Rs 52,000 crore debt as part of the airline’s strategic disinvestment process and private players eyeing the national carrier are likely to be saddled with some of its outstanding loans, says a media report.
This assumes significance in light of the unsolicited expression of interest from India’s largest low-cost airline IndiGo for taking over Air India. While Indigo has appeared keen to acquire a stake in Air India, the airline has said it would not be prepared to bear the state-owned carrier’s unsustainable liabilities.
Air India has total debt of about Rs 52,000 crore, comprising Rs 22,000 crore as aircraft loans and the rest as working capital loans and other liabilities. Air India has financed working capital through borrowings from a consortium of 25 banks.
Also the Civil Aviation Ministry is in favour of retaining Air India’s (AI) brand name even as the Centre is looking for a strategic investor to buy a stake in the national carrier.
Civil Aviation Minister Ashok Gajapathi Raju said the brand name Air India had a “sentimental value attached to it.” The government clarified that the stake sale in AI will not impact its flight operations. “We are very clear that all commitments and contracts that Air India has undertaken right now will be fully honoured.
The Aviation Ministry said that the group constituted under Finance Minister Arun Jaitley to chalk out the path of AI’s strategic disinvestment will deliberate upon a proposal to hive off its assets to a shell company. “The non-operational assets of Air India such as real estate and art treasures may be hived off. The group will take a final call on it,” Civil Aviation Secretary R.N. Choubey said. He said the group would also take a decision on whether the subsidiaries will be divested separately. “Whether subsidiaries should go as part of Air India meaning whoever buys Air India automatically buys this or whether they should be completely de-merged and divested simultaneously but separately will be decided,” he added. The Centre was also open to sell Alliance Air and Air India Express to private players.