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The government is preparing to separately sell Air India Ltd’s profitable ground-handling unit with the privatization of the national carrier making progress.

The finance ministry may soon issue a preliminary document for interested bidders for Air India Airport Services Ltd (AI APS), a senior official in the ministry said on condition of anonymity.

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“We are waiting for Air India’s strategic sale to proceed and then we will separately come out with expression of interest (EoI) for Air India’s ground-handling subsidiary," the official said. “There are other subsidiaries like Air India Engineering Services Ltd that will also be put on sale, but we have yet to decide on their timing."

Formerly known as Air India Air Transport Services Ltd, AI APS provides ground-handling services such as handling of ramps, passengers, baggage, cargo and cabin for Air India and its associate firms at 81 airports across India. It also provides ground-handling services to 37 foreign scheduled airlines, three domestic scheduled airlines and four regional airlines, among others.

The wholly owned unit of Air India was operationalized in February 2013, and since 2014-15, it has earned a net profit. During 2018-19, AI APS earned a net profit of 63.8 crore—the latest available data. It had 9,474 employees as on 31 March 2019.

After the unsuccessful bid to privatize Air India in 2018, the government had in January 2020 sought bids for selling its entire 100% equity in the airline, including the carrier’s 100% stake in no-frill airline unit Air India Express Ltd and a 50% stake in Air India SATS Airport Services Pvt. Ltd. After several extensions due to the pandemic, the government sweetened the deal last October, allowing potential bidders to quote “enterprise value" of the airline without fixing the debt-level beforehand.

As things stand, the Tata group and an employee consortium headed by a board member of Air India are among those who have submitted expressions of interest (EoI). The employee group comprises 219 staff and is headed by Air India’s director (commercial) and board member Meenakshi Mallik. It hopes to tie up with a private equity firm.

However, the names of potential bidders for Air India have not been officially disclosed by the transaction adviser. The department of investment and public asset management (Dipam) has said such information may only be shared with specific agencies in national interest. The finance ministry expects to complete the sale of the national carrier by September.

Spokespersons for the finance ministry and Air India did not respond to queries.

Air India had current liabilities and provisions, including short-term loans and trade payables of 70,686.6 crore and a net debt of 58,255 crore at the end of FY19. However, the Centre has transferred 29,464 crore of this debt from Air India to a special purpose vehicle, Air India Assets Holding Co. Ltd.

A successful privatization of Air India is crucial for the Centre to achieve its ambitious divestment goal of 1.75 trillion for FY22 after failing to complete any big-ticket privatization in FY21 due to the disruptions caused by the covid pandemic.

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