Narendra Modi Govt. to sell 100% stake in Air India
NEW DELHI : The government on Monday invited preliminary bids to divest its entire stake in Air India, and the airline’s subsidiary Air India Express along with its joint venture Air India SATS Airport Services Private Limited.Any bidder would have to agree to assume roughly $3.26 billion in debt, along with other liabilities, according to the document.
The last date for submission of bids is 17 March, and qualified bidders will be notified 31 March, according to bid document issued by the Department of Investment and Public Asset Management.
This is the second attempt launched by the government to sell the debt-ridden airline, which has accumulated over ₹50,000 crore in dues.
The government owns 100% stake in Air India, and its subsidiary Air India Express. AISATS is a joint venture partnership between Air India and Singapore Airport Terminal Services (SATS) Limited, which provides ground and cargo handling services.
The development comes after an initial attempt to sell a majority stake in the airline failed to draw a single bid in 2018. The airline is sitting on a debt pile of around Rs 58,000 crore, besides huge accumulated losses running into thousands of crores.
“The Government of India (GOI) has given ‘in-principle’ approval for the strategic disinvestment of AI (Air India) by way of the transfer of management control and sale of 100% equity share capital of AI held by GOI which will include AI’s shareholding interest of 100% in AIXL (Air India Express Limited) and 50% in AISATS (Air India SATS Airport Services Private Limited),” the document said.
The total debt of Air India and Air India Express to be taken on by the new buyer is ₹23,286 crore. The actual debt of the two entities combined was ₹ 60,074 crore. The balance of nearly ₹27,000 crore has been absorbed by the government.
The last date for submitting interest to the transaction adviser is March 17 and the result is expected to be known by March 31. Ernst & Young is the transaction adviser. The bid document says that the FDI policy for the sale remains unchanged, i.e. foreign carriers will be able to own 49% stake in Air India. The substantial ownership and effective control (SOEC) clause will also be applicable and will have to remain with an Indian.
This is the Centre’s second attempt to divest its stake in the national carrier which has been bleeding money. In 2018, the Nreandra Modi-led government had expressions of interest (EoI) to divest 76% stake in the airline but found no takers.
That time, the government had wanted to sell the loss-making parent with its profitable arm, Air India Express. Foreign entities including foreign airlines can own only up to 49% stake in domestic airlines.
Air India’s accumulated losses in the past decade stood at about ₹69,575.64 crore, aviation minister Hardeep Singh Puri had told Parliament in December. The national carrier reported a provisional net loss of ₹8,556.35 crore in FY19 compared with a net loss of ₹5,348.18 crore in the previous fiscal.
Air India, with a 12.7% share of the domestic market, carried 18.36 million domestic passengers in 2019, according to data from the Directorate General of Civil Aviation(DGCA). The national carrier had ferried 17.61 million passengers in 2018.
In February 2019, the Centre had set up Air India Assets Holding Ltd to park accumulated working capital loans not backed by any asset, standing at about ₹29,464 crore, four subsidiaries, non-core assets such as paintings and artefacts, land bank, and other non-operational assets. The Centre plans to sell these assets.
The government said that as part of the sale, the control of the carrier will remain with an Indian entity, limiting the scope of any foreign bidders interested in the asset. A successful bidder would win control of the airline’s 4,400 domestic landing and parking slots and 1,800 international slots at Indian airports, as well as 900 slots at airports overseas.
The latest offer should garner significant response partly because it involves a clean exit by the government, said CAPA aviation consultancy India head Kapil Kaul.”As the entire debt excluding aircraft debt is taken out of the deal, it signals a very determined effort to exit Air India to allow taxpayers’ funds be utilised for the government’s social agenda,” Mr Kaul said.
The government needs cooperation of Air India employees for carrying out the privatisation process, Mr Puri is said to have told the airline unions on January 2.
(With inputs from Agencies).
