Govt. plans to sell Air India, AI Express together:

Govt. plans to sell Air India, AI Express together:

Context

• The National Democratic Alliance (NDA) government is working to conclude the sale of national carrier Air India by June 2018 and is keen on selling its core airline operations, together with its low-cost international airline, Air India Express.

Decision taken by Air India-specific Alternative Mechanism

• As per a decision taken by the Air India-specific Alternative Mechanism, the Centre will look to sell AI’s regional airline Alliance Air to a separate universe of bidders while Air India and Air India Express will likely go together.
• The ministerial group meeting held on September 21 was of view that a separate universe of bidders or prospective buyers be invited for Air India’s ground handling subsidiary — Air India Air Transport Service Limited (AIATSL) — and its maintenance, repair and overhaul (MRO) unit — Air India Engineering Services Limited (AIESL).

Status of Air India

• Air India has amassed a debt of Rs 50,000 crore over the years, half of which is on account of buying costly aircraft beyond its means.
• Once the nation’s largest carrier, Air India’s market share in the booming domestic market has slumped to 13 per cent as private carriers expanded.
• Air India, which has fleet size of 114, mostly Boeings and Airbuses, is estimated to have booked operating profit of Rs 300 crore in 2016-17, almost three times the Rs 106 crore recorded in 2015-16.
• The government will infuse Rs 1,800 crore from the 2017-18 Union budget, after pumping in close to Rs 24,000 crore between April 2012 and March 2016, from taxpayers’ money.
• Air India is trying to shore up revenues through streamlining routes, phasing out of old fleet and consequential reduction in maintenance cost and closure of some overseas offices.

Talks with buyers

• Prospective buyers will be available from international airlines if bids for Air India and Air India Express are called together.
• Since Alliance Air operates flights mainly on regional domestic routes, it makes more sense to sell it off separately.
• The decision was taken after the government held several rounds of backchannel talks with prospective buyers of Air India and its subsidiaries.
• The government met companies involved in MRO, ground handling and airline operations to examine whether all the subsidiaries should be sold off together or calling for separate set of bidders would increase Air India’s valuation.

Interested buyers

• Selling Air India in parts could help the company attract more buyers and reduce some debt of the parent company.
• Aviation services provider Bird Group showed interest in buying Air India’s ground-handling unit AIATSL, making it the second company to show such interest after Inter Globe Aviation’s IndiGo last month.
• Indigo was keen on buying the international arm and low-cost division of the 1930-incorporated carrier that is known for its Maharajah mascot.
• The Tata Group, which has stakes in Vistara and AirAsia India, has also been mentioned as a possible suitor.