The government has sweetened the offer this time around. Last time, in 2018, when the Narendra Modi-led government had invited expressions of interest (EoI) to divest 76% stake in the airline, the acquirer was required to absorb Rs49,000 crore in debt.
The Centre on Monday invited preliminary bids to divest its entire stake in Air India, and the airline’s subsidiary Air India Express along with its joint venture Air India SATS Airport Services Private Limited. The last date for submission of bids is 17 March, and qualified bidders will be notified 31 March, according to bid document issued by the Department of Investment and Public Asset Management.
The government owns 100% stake in Air India, and its subsidiary Air India Express. AISATS is a joint venture partnership between Air India and Singapore Airport Terminal Services (SATS) Limited, which provides ground and cargo handling services.
The preliminary information memorandum issued by the civil aviation ministry, Air India and the transaction advisor EY showed that the government will give this massive debt relief to the two entities in order to keep the entities attractive for potential investors. There is no transfer of debt from Air India SATS Airport Services Private Limited (AISATS), 50% of which is held by Air India.
Following the debt relief, Air India and Air India Express (AIXL) will together retain ₹23,286.5 crore of debt, said the information memorandum. Considering the current mountain of debt Air India has, the relief given to the national carrier is massive, which indicates the government is serious about the transaction now.
Air India has current liabilities and provisions including short term loans and trade payables of ₹70,686.6 crore at the end of FY19. It also has non-current liabilities of ₹11,132 crore including long term borrowings. Air India Express Ltd has ₹192.5 crore of non-current liabilities including long term borrowings and ₹4,388 crore of current liabilities including short term borrowings at the end of FY19, says the preliminary information memorandum. Together, the debt burden works out to ₹86,399 crores, nearly three fourth of which will now be shifted to a specially created asset holding company, AIAHL.
The sum of certain identified current and non-current liabilities (other than debt) to be retained in Air India and Air India Express will be equal to the sum of certain identified current and non-current assets of the companies, said the information document. “As an illustration, if the proposed transaction were to be hypothetically closed as on 31 March, 2020, the debt of ₹23,286.5 crore would have been allocated to Air India and Air India Express (combined)," said the document. The allocation of debt to AIAHL, is subject to receipt of requisite approvals from lenders, creditors and regulators, as applicable, it said.
Air India’s accumulated losses in the past decade stood at about ₹69,575.64 crore, aviation minister Hardeep Singh Puri had told Parliament in December. The national carrier reported a provisional net loss of ₹8,556.35 crore in FY19 compared with a net loss of ₹5,348.18 crore in the previous fiscal.
Air India, with a 12.7% share of the domestic market, carried 18.36 million domestic passengers in 2019, according to data from the Directorate General of Civil Aviation. The national carrier had ferried 17.61 million passengers in 2018.
It had a fleet of 121 aircraft (excluding 4 B747-400 aircraft) as on 1 November 2019, mainly comprising Airbus and Boeing aircraft such as A-319, A320, A-321, B-777 and B-787 out of which 65 are owned/ on finance lease/bridge loans, 21 are on sale and lease back model and balance 35 are on operating lease, the bid document said.
In February 2019, the Centre had set up Air India Assets Holding Ltd to park accumulated working capital loans not backed by any asset, standing at about ₹29,464 crore, four subsidiaries, non-core assets such as paintings and artefacts, land bank, and other non-operational assets. The Centre plans to sell these assets.