Monday, March 19, 2018

Govt mulls allowing airlines with negative net worth to bid for Air India

New Delhi: The government is likely to relax the eligibility criteria for Air India disinvestment by allowing airlines with negative net worth to bid. However, non-airline companies may be told to satisfy minimum net worth conditions to prove their financial strength.
The evaluation committee of Air India, after discussions with the Ministry of Civil Aviation, had suggested that all bidders be mandated to fulfil a minimum net worth criterion, a source said. However, when the Core Group of Secretaries on Disinvestment (CGD) met over the last two weeks to finalise the bidding norms, some members pointed out that setting high net worth as an eligibility condition would block the prospects of many airline companies.
In fact, the difference in opinion between the two government bodies has led to a delay in the announcement of the expression of interest.
The core group has now suggested that a company with a proven track record of running a successful airline be allowed to bid even its net worth is negative. The CGD is headed by the Cabinet secretary and comprises secretaries to the Departments of Economic Affairs, Revenue, Expenditure, Public Enterprise, Corporate Affairs, Legal Affairs, and Civil Aviation.
“The committee of secretaries opined that aviation as an industry often has to withstand external economic or market downturns and long periods of revenue losses or low profit margins, which can result in a negative net worth despite the airline’s operating performance being strong,” an official told Business Standard. “A high net worth criterion will disqualify many international airline groups,” he added.
19/03/18 Arindam Majumder/Business Standard