Air India ‘disinvestment’ gets Cabinet nod; GoM to decide quantum soon

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.

By: ENS Economic Bureau | New Delhi | Updated: June 29, 2017 8:41 am
air india, Air India disinvestment, air india sale, arun jaitley, aviation news, business news, indian express news Air India disinvestment: The government could exit the airline by March 2018. (File/Photo)

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.

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  1. K
    Kamal Pasha
    Jun 29, 2017 at 11:59 am
    The buyer of Air India will be Gujrati like Modi. This is all arranged.
    1. L
      Jun 29, 2017 at 1:18 pm
      Why, were you interested? Are your pockets deep enough to buy that? What is wrong if AI's buyer is a Gujarati? Is Gujarat not a part of India?
    2. T
      Jun 29, 2017 at 10:41 am
      if Feku56 is honest unlike what he accuses of Sonia he should ensure AI is sold out in totality and no Indian company including TATA should be allowed to buy AI as then again it will be Indian Banks who will finance take over of AI which is a dud investment. let any cash rich middle east sovereign fund be allowed to take over AI at 50 discount for any delay will further erode valuation only like it happened in the case of MTNL
      1. A
        Jun 29, 2017 at 9:47 am
        Excellent decision. The Air India has become disease to Indian Economy. When I was in Saudi the Saudis used to laugh for punctuality of Air India "It comes any time there is no fixed time"
        1. A
          Anil Sharma
          Jun 29, 2017 at 3:52 pm
          Did they laugh when in 1990 Air India evacuated people from Amman(Jordan)? Or in 2015 from Yemen?
        2. I
          Indian Abroad
          Jun 29, 2017 at 9:04 am
          Privatize or close down Air India. Fire those 50-60 year old rude aunties. My comment are based mostly on other people's experience shared with me. Personally I have travelled Air India only once in my life, a long time ago. Never flew with the again.
          1. H
            Hari Haran
            Jun 29, 2017 at 8:58 am
            Using no brain within Government as an employee...they scream for instability after retirement. Loss to Los Angeles .Air India suffocate for air.
            1. v
              Jun 29, 2017 at 8:45 am
              Arrest former aviation minister Praful Patel Finance minister chidambaram PM Man mohan sing and recover the amount and stop privatization
              1. C
                Celinna Sabapathy
                Jun 29, 2017 at 8:44 am
                Pleàse stop sending me The Indian EXPRESS.
                1. A
                  Arun Kottur
                  Jun 29, 2017 at 8:40 am
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