Aviation Insider

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.

With the Air India disinvestment falling into shambles, it seems like the debt-ridden airline can’t catch a break.

The airline is looking for a 1000 crore short-term loan to manage its day to day operations. The airline is cash-strapped and has not paid its 11000 employees their salaries for the last 3 months.

The airline has released a bid document, requesting banks to provide them with a loan and put their financial bids by 13^th June. The short-term loan will be for a duration of one year from the date of availing the loan but, they can renew their loan after this period.

The airline has borrowed a total of Rs 6700 Crore from various banks between September 2017 and January 2018 to manage their working capital requirements and other needs.

Air India till now has received Rs 26000 Crore under the bailout package which was announced by the former UPA government back in 2012. The bailout clause said that Air India will get a total of Rs Rs 30,231 crore till 2021 if they can achieve their targets set by the UPA government.

The airline has been getting this money despite not achieving its targets. In 2016-2017 Air India recorded a loss of Rs 3643 crore and it is projected that in 2017-2018 it will suffer losses of Rs 3579.

The Government had agreed to sell 76% stake in Air India last year in June, but they received no bids for the national Carrier despite the fact that the date for submitting bids had been extended to 31st May 2018.

According to Civil Aviation Minister, Mr. Suresh Prabhu, the future course of action for the Air India disinvestment will be decided by Air India Specific Alternative Mechanism (AISAM), a group of ministers headed by Union Minister Arun Jaitley, in due course of time.