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Air India stake sale: Airline to be 'split' into four, employees could be absorbed in PSUs

The government seems to have changed its earlier stance of not selling the entities of India's national carrier Air India separately as it now wants to split the company in four different verticals for its sale in December this year.

twitter-logo BusinessToday.in   New Delhi     Last Updated: January 16, 2018  | 09:22 IST
Air India stake sale: Airline to be 'split' into four, employees could be absorbed in PSUs

The government seems to have changed its earlier stance of not selling the entities of India's national carrier Air India separately as it now wants to split the company into four different verticals for its sale in December this year. In a relief to the Air India employees, reports suggest the Narendra Modi government may consider absorbing them in various public sector undertakings (PSUs).

This is the second major development in the Air India divestment process in a week after the centre government brought in a change in the Foreign Direct Investment (FDI) norms to allow 49% foreign investment in Air India. Earlier, the government had said splitting Air India into parts could decrease its total valuation, though it's not clear what prompted it to take the current decision.

Union minister Jayant Sinha has said Air India and its subsidiary Air India Express will be sold as one company, and the government will assume non-core debt. The government will also take into consideration the non-core assets of the company, he assured. The government on January 11 permitted foreign airlines to invest up to 49 per cent in disinvestment-bound Air India.

While foreign airlines were allowed to invest up to 49 per cent in the paid-up capital of Indian private airlines under the government approval route, this provision was not applicable to Air India. The government has also made it clear that the substantial ownership and effective control of Air India would have to remain with Indian nationals. A group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon.

On January 7, a parliamentary panel said this was not an appropriate time to divest government stake in Air India, which should be given at least five years to revive. The panel is also understood to have concluded that the equity infusion in the national carrier, as part of the turnaround plan (TAP), was made on a "piece meal basis", adversely affecting its financial and operational performance and "forcing" the airline to take loans "at a higher interest rate to meet the shortfall".

The Parliamentary Standing Committee on Transport, Tourism and Culture concluded that the government should review its decision to privatise or disinvest Air India and explore the possibility of "an alternative to disinvestment of our national carrier which is our national pride". Observing that Air India has always "risen to the occasion" at times of need like calamities, social or political unrest in India or abroad, the Committee said "it would be lopsided to assess and evaluate the functioning of Air India solely from business point of view, as has been done by the NITI Aayog."

Air India has a total debt of about Rs 48,877 crore at the end of March 2017, of which about Rs 17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans.

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