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Air India sale gets off the ground as GoM decides to call for bids this month

It was not, however, immediately clear what the government plans to do with Air India’s large workforce, currently more than 20,000, including that of its subsidiaries (Photo: Reuters)Premium
It was not, however, immediately clear what the government plans to do with Air India’s large workforce, currently more than 20,000, including that of its subsidiaries (Photo: Reuters)

  • The government may also soon approve a further transfer of Air India’s debt to a special purpose vehicle
  • Air India’s losses have mounted to about 69,500 crore over the past decade

NEW DELHI : New Delhi: The process of Air India’s sale got off to a start on Tuesday, with the government approving a draft document inviting expressions of interest to be issued before the month-end, a senior official said on condition of anonymity.

In addition, the government could soon approve a further transfer of Air India’s debt—currently more than 60,000 crore—to a special purpose vehicle (SPV), the official said. About half the debt has already been transferred to the SPV.

Tuesday’s meeting of a group of ministers was attended by home minister Amit Shah, finance minister Nirmala Sitharaman, commerce minister Piyush Goyal, aviation minister Hardeep Singh Puri and aviation secretary Pradeep Singh Kharola.

Puri said the government will soon release a statement regarding the decisions taken at the meeting.

It was not, however, immediately clear what the government plans to do with Air India’s large workforce, currently more than 20,000, including that of its subsidiaries. Air India has 128 aircraft in its fleet, according to its website, while its subsidiaries Air India Express has 25 and Alliance Air 19. A cash shortage has forced the grounding of 26 of these aircraft, according to a report by aviation consultancy firm CAPA India.

In comparison, the country’s largest private airline, IndiGo, has 28,000 employees, including 4,100 pilots to operate over 250 aircraft.

In a separate development, Indian Commercial Pilots Association (ICPA), a representative body for pilots of Air India Ltd, on Tuesday said it will conduct a secret ballot to decide whether to call a strike or approach the National Company Law Tribunal (NCLT) as the airline has failed to clear pending dues of staff. “A strike shall be declared only after giving 14 days’ notice to the employer... and provided two-thirds of the members of the respective regions vote for the decision to strike," ICPA, which has more than 600 members, said in a statement to its members. “The decision to move NCLT shall be taken by a simple majority vote."

Experts say potential Air India bidders are likely to seek incentives if they decide to take on the challenge of trying to turn around the embattled carrier. The central government, which is the sole owner of the airline, was unable to find a bidder last year when it wanted to sell a 76% stake. This time around, the government has set itself a more ambitious target of selling its entire stake.

Besides the financial challenges, the Air India sale process is likely to face political hurdles. Trade unions plan to go on a nationwide strike on Wednesday, protesting, among other things, plans to privatize state-run companies including the national carrier.

Nevertheless, there are no easy choices as the airline’s losses have mounted to about 69,575.64 crore over the past decade, burdened not only by a large workforce but also government obligations that require it to fly a number of loss-making routes. For fiscal 2018-19, Air India’s net loss is provisionally estimated at 8,556.35 crore.

The airline loses about 26 crore a day that has to be plugged using taxpayers’ money to sustain operations, aviation minister Puri recently said.

Industry experts say the airline is capable of being turned around if freed of government control. It has unmatched advantages over rivals due to a robust service network and prime arrival and departure slots in the busiest of domestic and foreign airports. Some of its staff are among the most experienced in the industry.

“Air India may be under a huge debt pressure, but it remains an attractive asset with its slots, fleet and staff, which are of the highest industry standards," a senior official with a private airline said on condition of anonymity. “If the government makes provisions for the massive debt on the airline’s books, I don’t see why potential investors will shy away from buying the airline."

“The government would need to commit $300-$400 million to get all of the grounded aircraft back in the air," CAPA India said in a recent report.

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