Centre reverses stance: Air India may be sold piecemeal

16 Jan 2018

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The government will split state-run carrier Air India into four separate companies and offer at least 51 per cent in each of them for sale as part of a divestment plan proposed by the government, Bloomberg reported on Monday.

The core airline business, regional arm, ground handling and engineering operations of debt-laden carrier would be split, the report said.

This would be a distinct change from the government's earlier stance, which was not to sell the business verticals of the national carrier separately. The government had earlier said splitting Air India into parts could decrease its total valuation.

The core airline business comprising Air India and Air India Express, the low-cost overseas arm, will be offered as one company, and the process will be completed by the end of 2018, Bloomberg reported quoting Minister of State Jayant Sinha.

Air India being overstaffed, earlier reports said the government is considering absorbing them in various public sector undertakings or offer voluntary retirement packages, as any disinvestment is bound to face stiff opposition from worker unions.

"Various options are under consideration to protect the interests of the employees," civil aviation secretary R N Choubey told PTI.

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.

Last week, India cleared a proposal to allow foreign investors to own up to 49 per cent in the carrier.

Foreign direct investment of up to 49 per cent has been allowed in the debt-laden carrier. Efforts are on to ensure a smooth strategic disinvestment and a group of ministers are weighing various options.

On 10 January, the government allowed overseas entities, including foreign airlines, to own up to 49 per cent stake under the approval route in Air India subject to certain conditions.

"Substantial ownership and effective control of Air India shall continue to be vested in an Indian national," the government had said.

Civil aviation minister Ashok Gajapathi Raju had said permitting 49 per cent foreign direct investment in Air India brings the airline at par with other domestic carriers and does away with the preferential treatment that was extended to the national carrier.

The move has also been opposed by the Centre of Indian Trade Unions (CITU) and RSS-affiliated Swadeshi Jagaran Manch, among others.

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