The Cabinet on Wednesday gave in-principle approval for “disinvestment” of debt-laden Air India, making its intent to sell the debt-laden airline rather clear for the first time. The final modalities, including the quantum of stake sale, would be decided by a group of ministers, finance minister Arun Jaitley said, without elaborating on whether the national carrier will be privatised. A nagging drain on the exchequer for long, the national carrier has a total debt of around Rs 50,000 crore and an annual interest outgo Rs 4,500 crore. It is surviving on a 2012 bailout package, under which it has so far received Rs 24,000 crore.
As for the Air India disinvestment, official sources had said earlier that the government had firmed up a plan to exit the loss-making national carrier, involving the write-off of roughly half of its estimated liabilities of Rs 60,000 crore, with a possible haircut by banks reducing the cost of the exercise to the exchequer. While the write-off is of the carrier’s liabilities not backed by assets, the government might also have to incur an expenditure for the settlement of the sovereign-backed part of AI’s aircraft loan of about Rs 21,000 crore, they had said.
A third of the carrier’s aircraft loan is guaranteed by the government. They had added that lenders to the carrier have in informal talks with the government expressed their willingness to negotiate with the government on how to settle the AI loans including re-setting interest rates to accommodate the government’s plan. Also Read | Air India to retired staff: Stop trashing carrier on social media, or lose retirement perks
The civil aviation ministry had internally made a rough estimate of the value of AI’s physical assets at around Rs 25,000-30,000 crore. These assets included its 115-strong aircraft fleet (including Boeing Dreamliners), land parcels, buildings and also its valuable flying/landing rights and parking slots at airports across the world. The government could quit AI by end-March 2018 and transfer it to a new private-sector owner. Besides resolving issues related to the airline’s debt, the government would also have to take a call on whether to retain a minority stake in it.
Last month NITI Aayog in its report recommended the divestment of Air India by hiving off its profit-making subsidiaries initially. In FY16 the national carrier reported an operating profit of Rs 105 crore for the first time after the merger with Indian Airlines. Net losses were reduced to Rs 2,636 crore. The carrier is expected to make an operating profit of Rs 300 crore in FY17. As of now Air India has 12,000 employees and has started to hire pilots on contract. It is also expected to add 85 new planes its fleet size by 2020.