Air India privatisation: IndiGo, Etihad show interest in ailing national carrier; govt likely to come up with EoI next month

Representatives from these companies (IndiGo and Etihad) have met government officials and, unofficially, shown interest in the national carrier.

FP Staff December 31, 2019 12:36:51 IST
Air India privatisation: IndiGo, Etihad show interest in ailing national carrier; govt likely to come up with EoI next month
  • Civil Aviation Minister Hardeep Singh Puri said that the efforts to privatise the ailing Air India was going ahead well

  • If a prospective buyer does not come on board by June next year, an Air India official said the national carrier may go the Jet Airways way

  • The govt is looking to shift more debt from the balance sheet of Air India to AIAHL to further sweeten the deal for prospective buyers

In a big relief for the ailing Maharaja-Air India, budget carrier IndiGo and Abu Dhabi-based Etihad Airways reportedly have approached the government to acquire the debt-laden national carrier, according to news reports.

This development has come soon after a senior official of Air India expressed concern about the future of the struggling airline, which he said, might be shut down by June next year if it could not find out a buyer.

In the case of these two firms, IndiGo, India's largest airline by market share, can buy 100 percent in Air India while Etihad can acquire only 49 percent due to the current norms of the foreign direct investment (FDI) policy, said a report in The Economic Times.

Air India privatisation IndiGo Etihad show interest in ailing national carrier govt likely to come up with EoI next month

Representational image. PTI.

The government is expected to come up with the expression of interest (EoI) documents by next month, said the report.

“Representatives from these companies (IndiGo and Etihad) have met government officials and, unofficially, shown interest in the national carrier. The Tata Group, however, has not shown any interest yet,” the report said quoting an official in the know of the matter.

Govt seeks suitable buyers

Meanwhile, Civil Aviation Minister Hardeep Singh Puri claimed that the bid to privatise the ailing Air India was going ahead well even as the government's efforts in the past to find a suitable buyer for the crisis-hit airline did not succeed, reported Mint.

“The only way forward is for Air India’s privatisation," Puri was quoted as saying in the report.

On Monday, a senior official of Air India had said that the airline might be forced to shut down by June next year unless it finds a buyer as 'piecemeal' arrangements cannot be sustained for long.

Amid continuing uncertainty over the fate of the national carrier, the official said there is also need for funds to restart operations of the airline's 12 grounded narrow-body planes.

Air India has a debt burden of around Rs 60,000 crore and the government is still working on the modalities of disinvestment.

Sounding alarm bells, the official said Air India might well go the Jet Airways way if a prospective buyer does not come on board by June next year.

Rs 500-cr guarantee from govt

Last week, Air India had received a major boost as the government provided a Rs 500-crore guarantee which would help it secure fresh funds for operational requirements. Striving to keep afloat due to liquidity issues, the loss-making carrier had early this month had sought Rs 2,400 crore guarantee from the government for raising funds to mainly meet its operational requirements.

Early this month, it was reported that the government was looking to shift more debt from the balance sheet of disinvestment-bound Air India to asset holding company Air India Assets Holding Ltd (AIAHL) to further sweeten the deal for prospective buyers.

The government plans to sell 100 percent stake in the loss-making carrier.

In efforts to make the disinvestment more attractive, Air India has already transferred Rs 29,474 crore of debt to AIAHL, a Special Purpose Vehicle (SPV).

On 16 December, Civil Aviation secretary Pradeep Singh Kharola had said that the government was working on the debt issue of Air India to make it more attractive to buyers.

Kharola also indicated that the government's decision to retain a partial stake in the national carrier coupled with huge debt prevented potential investors to bid for the debt-ridden airline.

"We made an attempt last year. We learnt a few lessons and we are trying to work on that and improve at this point in time. The major lesson was that time we said that only 76 percent of Air India will be disinvested and rest 24 percent will be retained by the government," he said.

The debt-laden Air India posted a provisional net loss of Rs 8,556.35 crore in 2018-19, Puri had told the Lok Sabha on 5 December. It had a net loss of Rs 5,348.18 crore in the previous year.

With inputs from agencies

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