Air India has recommended to the government that its low-cost subsidiary and ground-handling unit be sold to improve the national carrier’s financial position in what could be a precursor to its eventual divestment.
This follows a failed plan to sell the debt-laden, state-owned airline earlier this year. The report suggests that Air India Express and Air India-SATS, which were previously meant to be sold with Air India, be put up for sale along with the engineering division and another ground-handling business, said a senior aviation ministry official.
The recommendations on improving Air India are currently being discussed at various levels in the ministry, he said. “The report mentions various ways to improve Air India — both financially and operationally,” he said. “The report is being discussed in the aviation ministry and will be forwarded to the finance ministry for further action.” The report was submitted by Air India chairman Pradeep Singh Kharola to the aviation ministry last week.
The government had sought to sell both units along with a 76 per cent stake in Air India in May. While AI Express is fully owned by Air India, the national carrier owns 50 per cent in AI-SATS and the rest is held by Singapore Airport Terminal Services (SATS).
Qatar Airways group CEO Akbar Al Baker said recently that he would be interested in the airline but not its subsidiaries. “Look, it’s not the debt that’s the baggage — it is the other functions that Air India carries out such as ground handling, engineering and things like that. We would be interested only in the airline,” Al Baker had said.
Proceeds from the sale of units would go toward repaying debt of about Rs 50,000 crore, about Rs 30,000 crore of which relates to working capital and the rest to plane purchases.
Air India has been seeking government help to clear its dues to foreign and Indian lenders apart from vendors. The government has provided interim support of about Rs 980 crore as equity and a sovereign guarantee to raise Rs 2,000 crore from banks. Of this, Air India has already raised Rs 1,500 crore.
A PTI report on Thursday said the airline has raised Rs 1,000 crore from the National Small Savings Fund and expects to mop up Rs 500 crore through short-term borrowings next week.
