Debt biggest challenge for Air India’s disinvestment
The Group of Ministers headed by Finance Minister Arun Jaitley will take a call on key issues that will make debt-laden Air India’s stake sale to private players more attractive.
The Ministerial group will consider hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step toward clearing up its balance sheet.
“The Civil Aviation Ministry had proposed forming a SPV housing a substantial portion of its working capital loan and assets,” a senior ministry official said, on the condition of anonymity. “The sale of Air India’s prime real estate assets will help in meeting its liabilities,” the source said.
Air India has a total debt of around ₹52,000 crore which comprises of ₹22,000 crore as aircraft loan and the rest as working capital loan and other liabilities.
Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz in Mumbai, freehold land in Chennai’s Anna Salai, an office in Baba Kharak Singh Marg in Connaught Place in New Delhi and freehold land and buildings in Hyderabad. However, the airline has mortgaged some of these as security with banks for availing loans.
The Government may also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries: its MRO unit Air India Engineering Services Limited, ground handling arm Air India Transport Services Limited and Air India Charters Limited.
“The proceeds from disinvestment of Air India’s subsidiaries may further help in clearing Air India’s debt,” a senior Air India official said which operates Air India Express.
Its other subsidiaries include: Airline Allied Services Ltd which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels) along with a joint venture AISATS.
Air India has made unsuccessful attempts in the past to clear its over Rs 50,000 crore debt, including asking banks to convert a part of loans into equity share and asking Reserve Bank of India to provide concessions for debt restructuring.
An official statement by Civil Aviation Ministry said that the Ministerial group will frame its recommendations on “treatment of unsustainable debt of Air India”, “hiving off certain assets to a shell company,” among others.
Various Ministries are still divided over the quantum of stake sale in Air India and the Ministerial Group will now take a final call on the matter. While government think-tank NITI Aayog and Finance Ministry favour a complete privatisation, Civil Aviation Ministry aviation ministry is keen that the government continues to remain a stakeholder in the national carrier after handing over its management to the private sector.