Centre to rejig Air India’s debt

Fresh round of talks possible with banks to take over a portion of debt as equity

June 22, 2017 08:49 pm | Updated 10:53 pm IST - NEW DELHI

Amid fresh talk of the Tata group evincing interest in buying out the cash-strapped national carrier Air India, Civil Aviation Ministry officials said that the Centre’s primary focus was to restructure the airline’s debt before it can reach out to potential buyers.

‘No meeting with Tatas’

Officials have also dismissed the notion that any back-channel talks were underway with Tata Sons, and asserted that the stake sale would be done through a transparent bidding process.

“Our first goal is to restructure Air India’s huge debt of around ₹50,000 crore. Otherwise, how will we find buyers?” a senior ministry official said, on the condition of anonymity.

On June 1, Tata Group Chairman N. Chandrasekaran met Finance Minister Arun Jaitley. On the same day, Civil Aviation Minister Ashok Gajapathi Raju also held a meeting with Mr. Jaitley on a plan to sell Air India’s prime properties across the country. However, both the meetings were unrelated, according to a senior Civil Aviation Ministry official.

“First of all, we cannot confirm if such a meeting (between Mr. Chandrasekaran and Mr. Jaitley) happened at all, and second, if it did happen, we can’t confirm what happened behind closed doors,” an official in the finance minister’s office said. An aviation ministry official also denied any reported meeting between Mr. Raju and the Tata Group chief on Air India disinvestment. A Tata Sons spokesperson declined to comment.

To make the debt-saddled airline attractive for disinvestment, the Aviation Ministry may ask the Finance Ministry to take over a part of the airline’s debt.

“For the first time in almost a decade, the airline registered operational profit of ₹105 crore in 2015-16. The airline is showing signs of revival operationally and that will be our selling point to the Finance Ministry,” the official said.

The Centre will also seek to negotiate afresh with banks to take over a portion of debt as equity in the airline even as such negotiations in the past have failed. A consortium of lenders had earlier rejected Air India’s proposal to waive off a part of its debt in exchange of equity. If the two options on debt-restructuring do not materialise, the national carrier will have to sell off its assets to reduce its debt, another official said.

Although the Aviation Ministry has proposed an overhaul in Air India’s management with increased private sector participation, it is wary to the idea of complete privatisation of the national carrier. “The government may retain a minority stake in Air India. The idea is to bring industry professionals in running the airline,” an official said.

(With inputs from

TCA Sharad Raghavan)

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