Air India : Divestment of the largest carrier out of India

Air India is owned by a government-owned enterprise, headquartered in New Delhi. It has an 18.6% market share and is the largest carrier out of India. In 2017, a committee has been set up for the privatization of Air India. The government has already infused Rs. 29,000 crore since 2012 while trying for the survival of AirIndia under the Turn Around Plan (TAP). The company’s working capital and net debt have swelled from 2018 by 6.1%. Even the operating expenses saw a rise as high as 24% y-o-y from 2018 which is approximately Rs 30,194.06 crore.

The government failed to raise money for Air India last year as they planned to hold a 24% stake in Air India. Now, they have decided to sell the entire stake in AirIndia Ltd., Air India Express(subsidiary) and AISATS in order to re-initiate the strategic divestment of AirIndia. AISATS provides ground and cargo handling services and is a joint venture between Air India and Singapore Terminal Services.

Privatization will help provide the government with an easy exit from this loss-making business. In order to operate the airlines, it is necessary to go for divestment as the company requires cash. In order to reduce the debt burden, the government transferred approximately Rs. 29,464 crore to Air India Assets Holding Ltd. (AIAHL) through a Special Purpose Vehicle (SPV) route.

The company plans to invite Express of Interest (EOI) wherein a virtual data room will be provided in order to provide confidentiality. A draft Share Purchase Agreement (SPA) is issued which contains details regarding the liabilities, their benefits and do’s and don’ts. They can raise concerns about unclear liabilities not stated in the SPA in the virtual data room provided. Though some clearances are needed to be taken care of.

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Strategic divestment of public sector enterprises is opposed by Swadeshi Jagran Manch as it is against the national interest. They believe that AirIndia at this hour of time requires professional management and restructuring rather than privatization. It is believed that restructuring the debt and assets will reduce Air India’s liabilities and help the company earn profits.

Due to the uncertainty and non-clarity on the privatization of Air India, the employees have planned to stall the process either by going on a strike or taking the NCLT route. Currently, the government is planning to sell AirIndia to a private sector player.