Govt may consider strategic sale of Air India after turnaround

Shishir Sinha Updated - March 12, 2018 at 12:25 PM.

Air India

The ailing Air India may be sold to a strategic partner as soon as the debt-laden airline achieves a reasonable growth rate.

The sale could happen if the struggling state-owned airline manages to stick to its turnaround schedule, sources said.

The sale suggestion was mooted by a group of senior officers constituted by the Group of Ministers (GoM) headed by the Finance Minister, Mr Pranab Mukherjee, entrusted with overseeing the affairs of the airline, at an October 29 meeting to brief the GoM, it is learnt.

The Group of Officers was constituted by the GoM to suggest the financial restructuring and turnaround plan for Air India.

Release of equity

The Group, which has officials from the ministries of Finance and Civil Aviation besides others, also suggested various milestones for release of equity.

These suggestions include no productivity linked incentives for staff until the airline is able to generate profits before tax. It also talked about a voluntary retirement scheme (VRS), for which a package needs to be worked out within three months.

The group also advised hiving off the Maintenance, Repair and Overhaul (MRO) operations and the Ground Handling Unit as separate business entities by January next year.

The Group has also emphasised the need to bring down Air India's daily cash losses.

Regarding financial restructuring, the Group felt that the Government should consider loan restructuring with a buy back guarantee. The airline is burdened with short-term debt of around Rs 22,000 crore and long-term debt of about the same amount.

The Group suggested that the airline should stick to its earlier plan of induction of aircraft till 2014-15 and review the position only then. The airline should not go for any new induction without proper route profitability study, the Group has said.

The GoM has already recommended an equity infusion of Rs 23,000 crore over 10 years starting 2011-12. This includes Rs 6,600 crore for the current financial year. The proposed equity infusion is attached with a condition of raising seat load factor from 69.5 per cent currently to 73 per cent in 2015 and 75 per cent in 2020.

According to a senior government official, the GoM is waiting for the Reserve Bank of India's views. The GoM will then finalise its recommendations on the Financial Restructuring and Turnaround Plan which needs to be approved by the Union Cabinet, sources added.

>Shishir.s@thehindu.co.in

Published on November 21, 2011 14:55