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Govt. sweetens Air India offer, puts 100% stake on the table

Reprieve of Rs. 40,000 crore in liabilities to buyer; second attempt in as many years

The Union government on Monday invited bids for a 100% stake sale of Air India (AI) and transfer of management control along with its complete share in two subsidiaries — low-cost international carrier Air India Express and ground-handling arm AISATS. The government has offered to hive off liabilities worth nearly Rs. 40,000 crore to sweeten the deal.

This is the second attempt in two years by the Narendra Modi-led government at privatising the national carrier. On May 31, 2018, when the deadline for bids closed, not even a single private player had shown interest.

On the table is a 100% stake in AI, 100% stake in AI Express Limited (AIXL) and all of the government’s 50% stake in AISATS, which is a joint venture with the Singapore-based ground handling company SATS Limited.

Up for grabs

The new buyer will get a total of 146 aircraft, 56% of which are owned by the airline group, while the remaining are on lease. It will also benefit from as much as 50% of the international market share held by Indian airlines as well as the airline’s 4,400 airport slots at airports in the country and 3,300 slots in 42 countries, which will be available at least for six months after the sale is complete.

As many as 9,617 permanent employees, including pilots and cabin crew with deep technical and operational expertise, will be up for grabs along with the airline’s brand as well as the famous “Maharaja” and “Flying swan” logos.

Any private or public limited company, a corporate body and a fund with a net value of Rs. 3,500 crore will be eligible to bid.

The last date for submitting interest to the transaction advisor is March 17 and the outcome of this round will be known by March 31, following which qualified bidders will be given two months to submit financial bids.

‘Great asset’

Minister of State for Civil Aviation Hardeep Puri said at a press conference, “There is a lot of interest [in Air India’s sale]. Today’s attempt is qualitative different from the previous attempt. Air India and Air India Express are a great asset.”

But the private player keen to buy Air India will also have to take on liabilities of Rs. 32,474 crore, which includes the airline’s debt of Rs. 23,286 crore.

The government will absorb Rs. 56,334 crore in liabilities, including Rs. 36,670 crore of debt.

These have been transferred to a special vehicle known as Air India Assets Holding Limited (AIAHL), which will also comprise real estate and other assets worth Rs. 17,000 crore. Therefore, the net liability to be borne by the government will be Rs. 39,259 crore.

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