|Pradeep Kharola, Air India CMD|
“The divestment has been put on hold for the time being,” Pradeep Kharola, chairman and managing director, Air India told a financial portal.
He said that the airline has been incurring losses, especially due to high crude oil prices, which made the bid unattractive.
“All the airlines have not...
done well in the past six months… Also, because the crude oil price is so high, it was thought that it was not the right time to divest it,” he said.
The government had set up a ministerial committee, headed by finance minister Arun Jaitley, to suggest ways to divest the airline. The government had decided to sell 76 percent of its stake in the national carrier and invited bids for the same in May 2018.
However, no buyer showed interest in the airline. The airline owed Rs 55,000 crore debt coupled with accumulated loss of Rs 30,000 crore.
The government was earlier contemplating to sell Air India in parts but ultimately decided to privatise the entire airline as a single unit.
“When we had decided to privatise the airline, things were fine… However, by the time the bids were invited, the tide had turned against us,” a senior government official had told Moneycontrol.
Union minister for civil aviation, Suresh Prabhu, had also said at Moneycontrol Wealth Creators Awards that the “the timing of Air India divestment was not right”.
Kharola said that the divestment has been “temporarily” put on hold and may not resume anytime soon.
“We are watching the situation… As the situation improves, then the government will decide,” he said.
Crude oil prices came down sharply from October. It has fallen by almost 30 percent in value to hover around $62 a barrel.
Also read: Government plans to halve Air India's debt under its revival plan
The CMD said that while revenue grew at about 15 percent in the first six months of FY19, it grew by more than 20 percent alone in November due to falling crude oil prices.
Centre has, now, decided to transfer Rs 29,000 - 30,000 crore of the airline’s debt to a special purpose vehicle (SPV) so as to reduce the debt on its book.
“The idea is to move this debt from Air India to this SPV with government's guarantee, leaving AI with balance debt of Rs 26,000 crore on its books," a senior government official had told Moneycontrol.
The SPV, Air India Asset Holding Company Ltd, will be responsible for selling non-core real estate assets, worth more than Rs 8,000 crore, of the airline. The proceeds, thereon, will be utilised to service this debt in the SPV.
For starters, it will sell AI’s ground handling arm-- Air India Air Transport Service Ltd (AIATSL)—by the end of this fiscal.
A senior aviation ministry official had earlier said that AI will hold discussions with the debtors and the banks to transfer their debt from its books to the SPV.
“Transfer of loan would require consent of the banks, so we are in discussion with them,” Kharola said.
He said that the airline is “expected to become attractive” after the said revival plan takes off.