Government Plans To Sell 100% Stake In Air India!

After an unsuccessful attempt to sell 76% stake in Air India last month, the government is reconsidering its terms and might sell the airline’s entire 100 % stake.

Government’s transaction advisors, Ernst & Young, conducted an analysis and found out that there were four reasons why no one bid for Air India –

• The reluctance of the government to sell 100% shares of the airline.
• The clause to retain over 27000 employees for a year.
• The buyer taking over 61% (Rs 33,392 crore) of the total debt of the airline.
• Keeping the operations of the airline independent of the buyer’s business for at least 3 years.

EY has said that the biggest reason for the failed disinvestment bid was the government’s clause to hold a minority stake in the airline after the sale.

The Government will review EY’s report and take a call. A group of secretaries will hold a meeting to discuss the terms of Air India’s disinvestment. Based on their decision the Air India Specific Alternative Mechanism (AISAM), a group of ministers headed by Mr. Arun Jaitley, will do what is necessary.

According to one of the officials, Air India sale will be decided on the political will of the government. He also said that there is no reason that the deal should be called off, however, it will all depend on AISAM’s decision.

Meanwhile, the government is planning to lend Rs 32 Billion to Air India as part of the bailout package that was announced in April 2012. Till now the airline has received Rs 260 Billion under this clause.

A few days back the airline had asked for short-term loans from banks to handle its day to day operations, but banks such as Dena Bank, Standard Chartered Bank & Allahabad Bank have already refused to extend their line of credit.

Aviation Experts have asked the government to take bold steps to sell Air India, citing that a massive debt burden might cause the airline to close down.