Government Plans to Sell Air India, AI Express Together

Government Plans to Sell Air India, AI Express Together

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.

The decision was taken by the Air India-specific Alternative Mechanism — a group of Ministers led by Finance Minister Arun Jaitley to decide on the modalities of stake sale in the national carrier.

As per the decision, 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.

At a meeting of the ministerial group on September 21, the view was 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) — top government sources said.

“The rationale is that we can find prospective buyers from international airlines if we call bids for Air India and Air India Express together. Since Alliance Air operates flights mainly on regional domestic routes, it makes more sense to sell it off separately,” a source added.

The decision was taken after the government held several rounds of backchannel talks with prospective buyers of Air India and its subsidiaries.

Sources said 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.

Till now, low-cost airline IndiGo has formally expressed interest in mainly buying Air India’s international operations, including Air India Express which flies to various airports in the Gulf, Middle East and South East Asia predominantly from Kerala. IndiGo co-founders have said that though it has been eyeing Air India’s international operations since “day one”, it would still be interested if the government sells Air India’s entire airline operations to a single entity.

While Turkey’s Celebi Aviation Holding and Delhi-based Bird Group have shown interest in Air India’s ground handling arm, India’s oldest private MRO firm AirWorks is keen on buying AIESL. Without revealing names, officials at the Civil Aviation Ministry said other airlines, both domestic and international, are also keen to bid for Air India’s airline operations.

On June 28, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave an in-principle nod for strategic disinvestment of Air India. The ministerial panel, led by Mr. Jaitley, is aiming to divest stake in Air India and its subsidiaries by June 2018, sources said.

The panel is also in favour of hiving off Air India’s properties and non-operational assets into a special purpose vehicle (SPV) to retire a portion of the national carrier’s debt, sources said.

The Union government recently chose consultancy firm EY and investment banker Rothschild as the transaction advisors and Cyril Amarchand Mangaldas as the legal advisor to help government with Air India’s disinvestment process.

Sourch: The Hindu