After the historic Air India privatisation, the government will now start work on monetising its four other subsidiaries, including Alliance Air, and over Rs 14,700 crore worth non-core assets like land and building, DIPAM Secretary Tuhin Kanta Pandey said. The government on October 8 had announced that salt-to-software conglomerate Tatas have won the bid to acquire debt-laden national carrier Air India for Rs 18,000 crore. This includes a cash payment of Rs 2,700 crore and taking over Rs 15,300 crore debt. The deal, which is expected to be completed by December-end, also includes sale of Air India Express and ground handling arm AISATS.
Talking to PTI, Pandey said that the Department of Investment and Public Asset Management (DIPAM) will now get down to working out a plan for monetising the subsidiaries of Air India which are with the special purpose vehicle AIAHL and setting off the liabilities.
“There will be a plan for monetising the assets of AIAHL. It is a very big task again of clearing of AIAHL liabilities and disposal of assets. In the AIAHL there is a company of ground handling, engineering and Alliance Air which have to be privatised,” said Pandey, who spearheaded Air India privatisation. “It (sale of subsidiaries) could not be started because these all are intimately linked. Unless and until Air India goes, we could not proceed with other things,” he added.
As a precursor to Air India sale, the government in 2019 had set up a special purpose vehicle Air India Assets Holding Ltd (AIAHL) for holding debt and non-core assets of the Air India group.
Four Air India subsidiaries — Air India Air Transport Services Ltd (AIATSL), Airline Allied Services Ltd (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India Ltd (HCI) — along with non-core assets, painting and artefacts, and other non-operational assets, was transferred to the SPV. Air India had a total debt of Rs 61,562 crore as on August 31. Of this, Tata Sons holding company Talace Pvt Ltd will take over Rs 15300 crore and the remaining Rs 46,262 crore will be transferred to AIAHL.
Besides, non-core assets of Air India including land and building, valued at Rs 14,718 crore, are also being transferred to AIAHL. Further, liabilities of Rs 15,834 crore towards dues to operational creditors, like those for fuel purchases, as of August 31 would be transferred to AIAHL.
Pandey said between September 1 and December 31 just before closing the deal, the government will work out a balance sheet of Air India. “The dues to operational creditors may not go up further in the September-December period if the government continues with the funding… They are dependent on Rs 20 crore/day, if the government shuts down funding then the dues will add up. So more or less it will not very much increase,” Pandey said.
After adjusting for all the dues to lenders and operational creditors and also the assets of AIAHL, the net liabilities left with AIAHL is Rs 44,679 crore. The government has been incurring per day expenditure of Rs 20 crore to keep Air India afloat. Excessive debt in the airline’s balance sheet had pushed equity value to negative at (-)Rs 32,000 crore and the option before the government was to either privatise or close it down.
Between 2009-10 and now, the government has infused over Rs 1.10 lakh crore into the ailing airline. This includes Rs 54,584 crore as cash support and Rs 55,692 crore as loan guarantee. While this will be the first privatisation since 2003-04, Air India will be the third airline brand in the Tatas’ stable and will give it access to more than a hundred planes, thousands of trained pilots and crew, and lucrative landing and parking slots all around the world.
Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932. It was called Tata Airlines then. In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe. Tata’s will have to retain over Rs 13,500 crore employees of Air India and Air India Express for one year, post which VRS could be offered. The terms of the deal allow Tata to go ahead with merger and also sell up to 49 per cent stake after one year, but ensure business continuity for three years. The Air India brand and eight logos too would be transferred to the Tatas but it will have a 5-year lock-in and with the clause that they cannot sell them to a foreign entity.
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