Tuesday, January 28, 2020

Air India sale: Govt's proposed deal to sell national airline sweeter than expected; buyer can recover investment, say analysts

The proposed Air India deal offered by the government is sweeter than expected, said a senior executive of a private airline. He said that given the number of aircraft owned by Air India and its low-cost subsidiary Air India Express, a buyer can recover a major portion of the investment by adopting the sale and leaseback of airplanes, according to an IANS report.

Global aviation consultancy firm CAPA on Monday termed the government's decision to sell 100 percent stake in Air India a "bold reform" and said it expects "significant" response from the prospective bidders.

"The Centre for Asia Pacific Aviation (CAPA) expects significant response (to Air India's stake sale) as the offer structured by the government is attractive," CAPA India chief Kapil Kaul told PTI. He said the time given for due diligence and submitting bids is also reasonable. "Clean exit by the government and entire non-aircraft-related debts taken out of AI (Air India) balance sheet, particularly as entire debt excluding aircraft is taken out and this signals a determined effort to exit Air India to allow taxpayers funds to be utilised for social agenda of the government," he said.

The government said on Monday it plans to sell its entire stake in Air India, in a revised push to sell its national carrier after an initial attempt to sell a majority stake in the airline failed to draw a single bid in 2018.

As part of the strategic disinvestment, Air India would also sell 100 percent stake in low-cost airline Air India Express and 50 percent shareholding in joint venture AISATS, as per bid document issued on Monday. AISATS is an equal joint venture between Air India and Singapore Airlines. It offers ground handling services.

Management control of the airline would also be transferred to the successful bidder.

The document set 17 March as the deadline for submissions of initial expressions of interest and said any bidder would have to agree to assume roughly $3.26 billion in debt, along with other liabilities, according to a Reuters report.
Under the popular sale and leaseback arrangement, an airline acquires the aircraft at an attractive price and sells the aircraft to a lessor at a profit. It then leases it back for its own use.

As per the bid document, Air India has an aircraft fleet of 121 aircraft (excluding 4 B747-400 aircraft) as on November 2019, mainly comprising Airbus and Boeing aircraft, out of which 65 are owned or on finance lease.
28/01/20 First Post

To Read the News in full at Source, Click the Headline


Post a Comment