People in the know said a proposal to transfer additional debt and liabilities of around Rs 10,000 crore each would be absorbed by the government, to lighten the burden for prospective buyers. “An in-principle approval has been given to hive off a portion of additional debt and some liabilities like dues to oil companies and airport operators as well as pending salary dues and benefits to permanent and retired employees…,” a second official said.
chartAs of FY19, Air India had assets worth Rs 28,000 crore and liabilities estimated at Rs 22,000 crore, primarily dues to vendors such as airports and oil companies and short-term working capital loans.
Out of a total debt of Rs 58,000 crore, the government has already transferred Rs 29,500 crore to the special purpose vehicle Air India Asset Holding. Now, another Rs 10,000 crore of debt hive off has been approved, leaving the bidder with Rs 18,500 crore of debt.
Sources said IndiGo, Vistara, AirAsia India, major global airlines like International Airlines Group (which owns British Airways and Aer Lingus), as well as sovereign and private global funds, such as Temasek, KKR, and Warburg Pincus, have attended roadshows organised by EY—an advisor to the process. EY, along with the Department of Investment and Public Asset Management, has held five roadshows in Mumbai, Singapore, and London to drum up investor interest.
A private owner will not enjoy the comfort of sovereign guarantee with banks, which the airline currently has because of government ownership, he pointed out. “Banks will be more cautious when allowing a private company to carry that much debt,” the executive said, pointing out that with Jet Airways belly up, there’s a void in connecting the country with long-haul destinations.
The new owner would also allow merger or reverse merger of Air India with any existing business of the buyer — a change from last year’s norms where it was made mandatory for a bidder to operate Air India at arm’s length from its other business till the time there was government shareholding in the company. This would help a potential suitor like Tata Sons, which has two airline companies — Vistara and Air Asia India — to merge Air India with the existing airline.
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