Monday, February 19, 2018

Air India may not attract bid in current form: Ashok Gajapathi Raju

Air India is a good airline but its finances are bad, making it unattractive to bidders in its current form, says union civil aviation minister Ashok Gajapathi Raju. The government is working on various options and expects to complete divestment of the flag carrier by the end of 2018, Raju tells ET. Edited excerpts:

You have said Air India’s debt is much more than predicted. Can you explain?

The airline has debt and dues to be paid to vendors. The airline owes money to (vendors) like oil marketing companies, the Airports Authority of India (AAI) and many more. Now, when you add the dues with debt, total liabilities would be much more. Fact is that the finances of Air India are bad. It is a good airline otherwise. In this existing form, it is highly unlikely that anyone will pick it up. If you try and bid out Air India in the same way as it is today … I do not think it will make economic proposition for anyone. I also do not think that it will attract anyone as it is, to my mind, as it is in a debt trap. You have to make it fairly attractive, workable before you put it out for bids. An alternative mechanism has been formed to guide on Air India privatisation and consultants are working out the details of the bid (process).

What issues has the alternative mechanism finalised?
Broadly, the debt and non-aviation assets will move into a separate company and Air India will be sold with aviationrelated assets. There are a lot of suggestions on amount of debt to be shifted and the number of companies to be bid out together, but the final decision will come soon. We expect to complete privatisation by (end of) this year.

How will you rate the budget from an aviation perspective? How would AAI invest its outlay?
First time, we are getting so much attention in the Budget. Anyway, aviation coming for the right reasons in the Budget is a positive. On the AAI bit, the company will have to leverage institutional finance to fund the airport project. It has a programme. Also, you cannot confine investments in the airport sector only to AAI. A lot of private sector investment will also come in the sector.
18/02/18 Mihir Mishra/Economic Times