NEW DELHI: The government will split Air India (AI) into four separate companies before putting it up for sale as part of its divestment plan of the national carrier, Minister of State for Civil Aviation Jayant Sinha said on Monday.
The core airline business comprising Air India and Air India Express, the low-fare international carrier, will be offered as one company. Ground handling services and engineering operations that will include Maintenance, Repair and Operations (MRO) activities will constitute two other firms. Alliance Air, which is the regional arm of AI, will be sold off as a separate company.
“The aviation sector is a very fast growing sector, with really exciting opportunities for all participants, so we felt all of this will unlock growth and competitiveness of AI group,” said Jayant Sinha.
AI has been unprofitable since its 2007 merger with the state-owned domestic operator Indian Airlines Limited. At the end of March 2017, the total debt of AI was `48,877 crore. Of the total debt, `17,360 crore was aircraft loans and Rs 31,517 crore was working capital loans.
Bidders will be allowed to bid for one or more companies and the interest of investors will be sought by the end of this month, said Sinha. On January 10, the government tweaked foreign investment rules and allowed foreign airlines to own as much as 49 per cent of AI.
Declining to name potential bidders, the minister said that management control will be retained by local investors. The government has already made it clear that most of the debt owed by the carrier will be retained on the government’s balance sheet, while borrowings linked to core operations will be passed on to the new investors.
A group of ministers is in the process of finalising the modalities for the proposed strategic stake sale.
On January 7, a parliamentary panel had said this was not an appropriate time to divest government stake in AI, which should be given at least five years to revive. Under a turnaround plan approved by the previous UPA government, AI is to receive up to `30,231 crore from the government subject to meeting certain performance thresholds. The 10-year bailout package began from 2012.
Of the five subsidiaries that AI has, three are profit-making. They are Air India Express, AI Transport Services (ground handling unit) and AI-SATS (a 50:50 ground-handling JV with Singapore Airport Terminal Services). Air India Express reported a net profit of `296.7 crore in 2016-17.
Along with its subsidiaries, AI has nearly 29,000 employees and the government is exploring options to absorb them in public sector enterprises or offer voluntary retirement package.