The government has kicked off the disinvestment process of Air India for the second time after it failed to receive a single bid in the first attempt back in 2018. In line with the disinvestment plans last time, the Centre has issued a preliminary information memorandum for expressions of interest to sell its stake in Air India, Air India Express and ground-handling company Air India-SATS. The government has made some key changes to what is on offer:
Air India disinvestment: A 100% stake sale
Most significantly, the government will offload 100% of its stake in Air India, compared with 76% put on the block last time. According to industry watcher, the government holding even a minor stake in the airline post disinvestment was seen as a huge negative for any potential buyers. Government sources, however, had said that the rationale behind holding a 24% stake was that the sale of the remaining 76% would immediately swell the value of government’s shareholding in the airline, which it would offload at a later point in time.
Air India’s debt situation
Over the past two years, the government has allocated some part of Air India’s debt to a special-purpose vehicle and in this round of the disinvestment process, the buyer will have to take on Rs 23,286 crore of debt out of a total Rs 60,074 crore. Compared with this, in the last attempt, a potential buyer would have to take on Rs 33,392 crore of debt and current liabilities. The amount of debt being bundled with the airline in this attempt is towards the aircraft that are being sold off along with the carrier as part of the transaction. The working capital and other non-aircraft debt will be retained by the government.
Air India’s assets
The new owner will be taking on a fleet of 121 aircraft in Air India’s fleet and 25 planes in Air India Express’ fleet. These exclude the four Boeing 747-400 jumbojet aircraft that the airline plans to transfer to its subsidiary Alliance Air, which is not a part of the current transaction. However, like the last attempt, the properties currently in use by Air India, including the Nariman Point building and the company’s headquarters near Connaught Place in New Delhi will be retained by the government.
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