The Preliminary Information Memorandum for inviting expression of interest (EoI) from interested bidders has been approved for strategic disinvestment of Air India.
The newly constituted Air India Specific Alternative Mechanism (AISAM), headed by Home Minister and comprising Union Ministers of Commerce & Industry, Finance & Corporate Affairs and Civil Aviation, as members, has sanctioned the release of the PIM for inviting EoI.
The decisive parameters in the current PIM include transfer of management control and sale of 100 percent stakes of Air India along with Air India’s 100 percent share in its subsidiary, Air India Express and 50 percent stake in joint venture, AISATS.
Freezing of debt in Air India at Rs 23,286.5 crore which is around equivalent to the Written Down Value (WDV) of combined assets of Air India and Air India Express.
The liabilities to be retained in Air India will be equal to certain current and non-current assets. Considering the combined figures as on 31 March 2019 the liabilities retained will be Rs 8,771.5 crore.
The remaining debt and liabilities of Air India and Air India Express will be allocated to SPV, Air India Assets Holding. The contingent liabilities related to statutory dues and government dues will be indemnified by the government.
The contingent liabilities due to retired employees will be clarified at the RFP stage. Also, Corporate guarantees given by Air India on behalf of Alliance Air will not be passed to new investor.
Land and buildings at Delhi, Mumbai airports and Corporate Office which are core assets for running the airline will be given to new investor on right-to-use basis for a limited period of time.
The government has committed to pay certain employees’ related dues before closing of the transaction. The bidding structure on forming the consortium has been eased as compared to the last round of bidding.
The financial capability of prospective investors has also been made more attractive, such as lowering of net worth criteria to Rs 3,500 crore, and net worth qualification of investor-based on strength of its affiliate. An individual member must have at least 10 percent share in the consortium i.e. a net worth or ACI of Rs 350 crore.
The scheduled Indian commercial operator(s), however, with zero or a negative net worth are eligible to be a member of the consortium provided they have shareholding of less or equal to 51 percent. The Air India with new investor will continue using the ‘Air India’ brand.
Air India, along with Air India Express, has 146 aircraft in its fleet, 82 of which are owned by it. Air India and Air India Express have average aircraft age of eight years which is among the youngest fleet, while 27 Boeing-787 with Air India are five years and 27 Airbus-320 Neo (CFM engines) are two years.
Air India and Air India Express have a combined revenue of Rs 30,632 crore in 2018-19. AISATS provides in-house ground handling facilities at key metro airports – Delhi, Bengaluru, Hyderabad, Thiruvananthapuram and Mangaluru.
Even after infusion of about Rs 30,500 crore as per Turn Around Plan since 2012, Air India has been running into losses and has an accumulated debt of about Rs 60,000 crore.
