Air India debt may be cut before sale
India plans to exclude more than half of the $7.6bn debt owed by the struggling national airline to help burnish its appeal as Prime Minister Narendra Modi presses ahead with a sale, people with knowledge of the matter say.
The government proposed to transfer all of Air India’s non-aviation assets and short-term loans of as much as 300-billion rupees ($4.7bn) to a separate company, readying the airline for prospective buyers, the people said, asking not to be identified discussing confidential information. Authorities aimed to launch the bidding process before March 31, they said.
Such a move would entail the government absorbing the moneylosing firm’s working capital loans, property from Tokyo to London and
two hotels. The buyer would be left with aviation-related assets and about 200-billion rupees of loans borrowed to acquire aircraft, the people said.
A successful sale of Air India is crucial for Modi, who wants to showcase his commitment to reducing the state’s role in business after many of his predecessors failed to dispose of the carrier in the face of stiff political opposition.
Air India has a combined workforce of 27,000 and unions with a history of strikes and grounded flights. It has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines.
STATE SUPPORT
In 2012, the state bailed out the carrier with 300-billion rupees in funds, guaranteeing the loans and promising interest payment on some debt. But Air India’s need for working capital exceeded that.
Foreign airlines would be able to bid, though their holding would be capped at 49%, sources said.
IndiGo, India’s biggest commercial airline, said in June it was willing to buy Air India’s international operations or even the entire airline business.