Ground handling up for grabs in AI rescue effort

ON THE BLOCK AIATSL to be first hived off into an SPV; to be sold by fiscalend

In a last-ditch effort to salvage Air India, a government panel on Tuesday decided to sell the national carrier’s ground handling arm and use the proceeds to pare its massive debt burden.

According to the plan, the government will hive off Air India Air Transport Services Ltd (AIATSL) into a special purpose vehicle (SPV) that will be directly owned by the government. Once the transfer is completed, expressions of interest in the unit will be invited, civil aviation secretary RN Choubey told reporters after the meeting of the group of ministers. The government expects to complete the sale by the end of this fiscal.

If the sale is successful, it will provide some relief for the government that is struggling to meet its 3.3% fiscal deficit target for the year. Although the money raised through the sale will be used to cut Air India’s debt, it will still help free up government resources that would otherwise have been used to fund the ailing carrier. AIATSL is the largest ground handling company in India and is present in almost all airports across the country where the airline operates. The company has close to 80-85% share of the domestic and international ground handling business in India, according to Air India officials. It is also profitable.

Paying down part of Air India’s accumulated debt of over ₹48,000 crore, along with efficiency improvements, under a turn- around plan could also generate investor interest in the moneylosing national carrier.

Choubey said the government is separately taking action for turning around Air India, but declined to give further details. An attempt to sell 76% of Air India, 100% of low-cost international carrier Air India Express Ltd and 50% of Air India SATS Airport Services Pvt. Ltd had failed to take off earlier this year because of Air India’s huge debt and the fact that the government chose to retain 24% in the carrier.

The ministerial panel that met on Tuesday also decided to go ahead with the sale of stateowned helicopter services firm Pawan Hans. Choubey said a request for proposals for the sale would be issued soon.

AIATSL HAS CLOSE TO 8085% SHARE OF THE DOMESTIC AND INTERNATIONAL GROUND HANDLING BIZ IN INDIA

Choubey said the strategic sale of AIATSL is expected to be a success as it had received unsolicited offers from four-five investors earlier when the government had given an in-principle nod for sale of Air India and its subsidiaries. New Delhi-based private operator Bird Group, which provides ground-handling services at seven airports including Delhi, Mumbai, Bengaluru and Kochi, had at that time expressed interest in buying the Air India arm. However, at that time, the centre did not want to sell the airline’s individual units separately.

“A significant part of Air India’s debt is being hived off to the SPV and the government is taking responsibility for that debt. When that much of debt is hived off into the SPV, the intention is that when the subsidiary is sold, the sale proceeds should be used to retire the debt,” said Choubey, adding that it would be a big relief for Air India. The buyer will not have to bear the debt being hived off to the SPV.

Experts said under the rigid administrative framework of the government, running an airline profitably is an impossible task, as aviation is a difficult sector, with very thin margins, and needs quick decision-making.