India Today - - UPFRONT - —M.G. Arun

After an­nounc­ing on Jan­uary 10 that na­tional car­rier Air India would be opened up to pos­si­ble for­eign di­rect in­vest­ment (FDI), the gov­ern­ment now says it will be sold as four dif­fer­ent com­pa­nies. While the core air­line busi­ness, con­sist­ing of Air India and Air India Ex­press, will be of­fered as one com­pany, AI’s re­gional arm, ground han­dling, and en­gi­neer­ing op­er­a­tions will be sold sep­a­rately, Union min­is­ter of state for civil avi­a­tion Jayant Sinha has said. “Avi­a­tion is a very fast grow­ing sec­tor, with re­ally ex­cit­ing op­por­tu­ni­ties for all par­tic­i­pants, so we felt all of this will un­lock growth and the com­pet­i­tive­ness of the Air India group,” Sinha said, adding that man­age­ment con­trol will be with lo­cal in­vestors.

The sale process is ex­pected to be com­pleted by end­2018. Although the sale of the air­line—which has been los­ing Rs 5,000 crore a year on av­er­age—was an­nounced early last year, the re­sponse from po­ten­tial bid­ders has been rather tepid. There has been only one for­mal

ex­pres­sion of in­ter­est for Air India so far—from IndiGo. Although the Tata Group, which owns Vis­tara and has a stake in Air Asia, has said it was eval­u­at­ing a deal, there has not been any for­mal letter to the gov­ern­ment on this so far. All po­ten­tial bid­ders will want clar­ity on who will bear the car­rier’s huge debt, which stood at Rs 48,877 crore on March 2017. Of this, Rs 17,360 crore is loans taken to ac­quire air­craft while Rs 31,517 crore is work­ing cap­i­tal loans.

Re­ports say the gov­ern­ment is plan­ning to hive off Air India’s un­sus­tain­able debt to a spe­cial pur­pose ve­hi­cle to make the deal at­trac­tive. This would mean that only the air­craft loans would re­main with the com­pany. This, say ex­perts, could be cov­ered by fu­ture cash flows. But some ex­perts say the gov­ern­ment’s plan to re­tain 51 per cent stake in each of the four parts may be a deal­breaker for po­ten­tial in­vestors. It’s no se­cret that the air­line’s woes owe mainly to mis­man­age­ment over the years by its po­lit­i­cal masters and the bu­reau­cracy. Only by let­ting the pri­vate part­ner have a de­ci­sive say in the op­er­a­tions of the air­line can it hope to be suc­cess­ful, as the Maruti­Suzuki joint ven­ture has demon­strated in the auto sec­tor.

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