Air India divestment: Govt may create separate company to hive off debt

The government is considering creating a separate company in which it will park nearly half of Air India's massive Rs 55,000 crore debt, sources have told CNBC-TV18.

The sources said that Rs 25,000 crore worth of leasing loans and bad assets will be hived off via this entity. The government is also mulling selling off profitable assets separately and is firm on taking the e-auction route.

The Group of Ministers met last week to decide on the contours of divesting the national carrier. They have reportedly agreed on hiring independent valuers - financial, technical, and legal, for the airline's assets and will float a request for proposals soon. They are focusing on making it lucrative for other companies to bid on Air India.

Air India On A Wing And A Prayer

Sources said the disinvestment is likely to be a long-drawn process and the government is targeting December this year for a final decision.

Meanwhile, weeks after IndiGo expressed interest in Air India’s businesses, private equity players KKR and Warburg Pincus are eyeing the national carriers units.

The firms have each asked for details of the proposed Air India privatisation process, according to a report in Mint. It added that the discussion are at  “a very early stage” and will gain momentum after there is clarity on divestment process.

Air India Transport Services, Hotel Corporation of India, Air India Charters, Air India Engineering Services and Airlines Allied Services are the five subsidiaries of Air India.

The airline, surviving on a Rs 30,231-crore government bailout package, has accumulated losses of around Rs 52,000 crore and as much debt. The package, approved by the previous government in 2012, called for staggered equity infusion over nine years. It has so far received Rs 23,993 crore under the package.

The airline reported an operating profit of Rs 105 crore in 2015-16 though this was contested by Comptroller and Auditor General which said it was actually an operating loss of Rs 321 crore. The national carrier hasn’t made a net profit in at least a decade.

Air India has a 14 percent market share in the domestic market and 17 percent share of the overseas traffic flying to and from India.

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