Air India’s divestment to begin with sale of its airline arm

Air India’s airline arm will be the first entity that will be sold off by the government as part of strategic divestment of the airline, according to sources.

Published: 08th March 2018 01:55 AM  |   Last Updated: 08th March 2018 06:05 AM   |  A+A-

By Express News Service

NEW DELHI:Air India’s airline arm will be the first entity that will be sold off by the government as part of strategic divestment of the airline, according to sources.The government had earlier announced that Air India will be split into four parts AI-AI Express-AI SATS; ground handling unit; engineering units and Alliance Air — will then be offered for sale individually. Air India and Air India Express, the low-fare International carrier, comprise the core airline business of Air India. Alliance Air which will be sold off as a separate company is the regional arm of Air India.

A senior civil ministry official said that the bid documents for the main airline arm will be out in a couple of weeks. Sources said that the government wants to first deal with the main airline arm as it is the most complex aspect of the sale of Air India.

Air India’s debt, which could be as high as Rs 70,000 crore, will be spread over the four entities and an Special Purpose Vehicle (SPV) that will remain with the government. IndiGo has given a formal expression of interest for the airline arm in terms of “international operations of AI and AI Express” or “alternatively all of the airline operations of AI and AI Express”.

Another undisclosed foreign player has approached the government to buy 49 per cent in AI’s airline arm. Other airlines like Jet, Vistara and Qatar Airways are watching from the sidelines as they are waiting for the bid documents to know exactly what is for offer and for how much.

The government plans to decide on AI’s new owner by June-end and complete the “legal closing” of the transaction by December when the Maharaja’s assets are transferred to the winning bidder. Air India is surviving on an equity infusion of Rs 30,231 crore approved in 2012 and which was to be given over a decade. The route for foreign investment in Air India was paved in January when the government tweaked foreign investment rules and allowed foreign airlines to own as much as 49 per cent of Air India.

What is it all about?
Last year, the Cabinet Committee on Economic Affairs gave its in-principle nod for the strategic disinvestment of the airline. Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to `30,231 crore from the government subject to meeting certain performance thresholds

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