Monday, January 27, 2020

Air India sale: EoI out, govt to completely exit airline

The Government of India (GoI) will completely exit Air India, including in units Air India Express (AIXL) and Air India SATS (AISATS), in what is seen a major step to ensure success in its second attempt at divesting the national carrier.

"The GoI has given an ‘in-principle’ approval for the strategic disinvestment of Air India by way of transfer of management control and sale of 100 percent equity share capital of AI held by GoI, which will include AI’s shareholding interest of 100 percent in AIXL and 50 percent in AISATS," the expression of interest (EoI) document released on January 27 stated.

The government has appointed EY to advise and manage the proposed transaction. The last date to submit the EoI is March 17, and the government will intimate the qualified bidders by March 31.

A successful sale of Air India is imperative for the government to meet its disinvestment target. Moreover, the airline, which is dependent on government largesse to run its operations, needs a new owner to keep flying.

Its earlier attempt in 2018, when the government had offered to sell 76 percent stake, had come a cropper.

The national carrier, whose net loss in FY19 had ballooned to Rs 8,556 crore from Rs 5,348 crore in the preceding year, has total liabilities of over Rs 52,000 crore. To attract additional suitors this time, the government has already parked nearly Rs 30,000 crore of debts and liabilities in a special purpose vehicle (SPV).

The new owner of the airline will be left with only Rs 23,286 crore worth of debt, taken mainly for aircraft purchases and currently secured against government guarantees. The guarantees will lapse once the new buyer takes over.

While AIXL is the profitable low-cost arm of Air India, which flies to short haul international destinations, AISATS is a joint venture that provides ground and cargo handling services. The Centre holds 50 percent stake in AISATS.
27/01/20 Moneycontrol
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