Air India to be sold lock, stock, and barrel
21 October 2019
The government has moved all hurdles in the sale of state carrier Air India to a private party by eliminating all conditions and transferring all its debt to a special purpose vehicle.
The sale will be 100 per cent and the buyer may also get to use the master brand and logo along with Air India’s iconic mascot, the Maharaja, as the government is keen to push through the sale.
This means that the value of the brand will be part of the total valuation of the airline, There are 12 subbrands with Air India which are being examined for severance.
However, subsidiaries such as Air India Express, the profitable low-fare carrier, won’t be included in the main sale and will be divested separately. These units won’t be able to use the master brand and logos once Air India is transferred to a new owner.
Air India Express, Alliance Air and Air India Singapore Terminal Services Ltd will be excluded from the main Air India deal, as will Air India Air Transport Services and Air India Engineering Services. These will be sold separately, reports citing official sources said.
Air India’s current logo is a red swan emblazoned with the Konark Chakra in orange. The swan was adapted from Air India's old centaur logo while the chakra is from Indian Airlines logo following the merger of the two. The Maharaja mascot has been a popular brand since it first appeared in 1946.
The airline is sitting on a debt pile of around Rs58,000 crore, besides huge accumulated losses running into thousands of crores.
Last week, civil aviation secretary Pradeep Singh Kharola took a review meeting of Air India ahead of the airline's board meeting, which is scheduled to be held on 22 October for approving the consolidated account statement for the fiscal ended March 2019.
Earlier this month, Air India management held a meeting with its trade unions on the proposed privatisation of the loss-making carrier. However, the majority of its unions were opposed to the move, fearing job losses.
As part of efforts to clean up the balance sheet of Air India, around Rs30,000 crore of its debt is to be repaid by way of proceeds from the issuance of bonds by its special purpose vehicle, Air India Asset Holding Ltd (AIAHL).
AIAHL was set up for warehousing accumulated working capital loans not backed by any asset along with four subsidiaries - Air India Air Transport Services Ltd, Airline Allied Services Ltd, Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India Ltd (HCI) - and non-core assets, including paintings and artifacts.
It has already mopped up a total of Rs21,985 crore by way of bond issues since 16 September and the proceeds would be utilised to pare the debt of the national carrier.
EoI inviting bids for 100 per cent stake sale are likely to be floated either this month-end or next month. Bidding for the national carrier will be carried out through a newly developed e-bidding system.
Some entities have already expressed interest in buying Air India, the sources said, adding the Expression of Interest (EoI) document is being given the final touches.
A final call on key aspects of the sale will be taken by the AI specific alternative mechanism headed by home minister Amit Shah. Others on the panel are finance minister Nirmala Sitharaman, commerce and industry minister Piyush Goyal and minister of state for civil aviation Hardeep Singh Puri.