In what experts describe as a desperate attempt to sell national carrier Air India, the Indian government of prime minister Narendra Modi has announced it will absorb a major part of Air
India's loans, thus removing a major hurdle in its so far unsuccessful efforts to privatise the indebted carrier.
Indian media reported that the government has raised Rs 22,000 crore (US$3.1 billion) through issue of bonds, of which Rs 7,985 crore was raised last week.
Along with the transfer of Rs 7,464 crore of local bonds to the accounts of Air India Asset Holdings (AIAHL) from Air India, the move will almost halve the carrier’s nearly Rs 58,000 crore
Of the Rs 22,000 crore raised by AIAHL — a special purpose vehicle to house AI loans and assets — Rs 15,000 crore will be used to repay working capital loans and the rest will be for clearing aircraft loans.
An Economic Times (ET) report said that the government plans to sell Air India along with low-cost international subsidiary Air India Express and its 50% stake in ground handling company Air India Singapore Airport Terminal Services Ltd (AISATS).
Subsidiaries like regional airline Alliance Air, Air India Engineering Services Ltd (AIESL) and ground handling arm Air India Air Transport Services Ltd (AIATSL) will be sold separately.
Final approval is still pending
The ET report noted that this latest move by the Modi government means that Air India will be left with about Rs 28,000 crore loans on its books. Of this, about Rs 12,500 crore are against aircraft loans - Rs 5,500 crore against Airbus aircraft whose repayment is due in 2030-31 and bridge loans of Rs 7,000 crore for six Boeing 787 Dreamliners. This Rs 7,000 crore will be refinanced either through sale and leaseback or outright purchase. The rest Rs 15,500 crore are working capital loans.
The government is also considering waiving the total working capital debt of the company before it is divested, ET reported last month.
The proposal will require approval from a ministerial committee headed by home minister Amit Shah and with aviation, finance and commerce ministers as members.
The ET quoted an unnamed government official as saying that the government had studied all reasons raised by the industry after the government attempt to divest a 76% stake in Air India drew a blank last year due to various reasons.
Future owners are given free hand to ax jobs after AI is privatized
These included staffing levels, employee medical benefits as well as flying privileges for workers and their families even after retirement, along with its towering working capital debt.
The government is now not only looking to fully exit the carrier but also cutting down working capital and allowing future owners to lay off employees after a period of one year post divestment.
CFG last week reported that the Indian flag carrier was facing mass resignations of its pilots after some 120 Airbus A-320 pilots tendered their resignation after their demands for a salary hike and promotion were not met by the Air India management.
A government official told Reuters in July, that the government expects to get US$2.1 billion from selling the airline.
Nol van Fenema