1. Air India stake sale: Govt plans to cut stake to under 51%, says MoS Mahesh Sharma

Air India stake sale: Govt plans to cut stake to under 51%, says MoS Mahesh Sharma

Minister of state for civil aviation Mahesh Sharma feels that banks and private parties will be keen to hold a stake in Air India, if offered.

By: and | New Delhi | Updated: March 23, 2016 2:58 PM
air india, air india economy class, air india business class, air india neos, air india news Minister of state for civil aviation Mahesh Sharma feels that banks and private parties will be keen to hold a stake in Air India, if offered. (Reuters)

Air India may be a loss-making carrier for more than two decades. It may have a bloated workforce, and whatever recent strides it has made in terms of projections of turning operationally profitable in FY16 and reducing its losses by almost half is largely on the back of low jet fuel prices and government bailout money; but minister of state for civil aviation Mahesh Sharma feels that banks and private parties will be keen to hold a stake in it, if offered.

In an interview with FE, Sharma said that the government plans to bring down its stake in Air India to below 51%, by basically asking the banks to convert their debt into equity. However, he said that the timeframe for this has not been decided and the price at which the banks would be proposed to take this step not been worked. According to him, this thought process is at initial stages right now and therefore, even banks have not been sounded on whether they would be keen on taking such a step.

Sharma said a part of the airline could also be divested in favour of a third party, so that the government’s holding is at bare minimum of 26%.

The airline’s debt currently stands at over Rs 40,000 crore.

The lenders include a consortium of 26 banks led by State Bank of India, which had restructured Rs 18,000 crore of loan in 2011 in lieu of preference share worth Rs 7,500 crore.

“We are discussing several options for revamping Air India’s corporate structure, including offering equity to banks for the value of debt and divest some stake to a third-party,” Sharma said.

Sharma has based his hopes on the projections by the airline that it will turn profitable by FY19. The company is likely to post around Rs 10 crore of operating profit this fiscal, mainly on the back of a fall in fuel prices, and other cost-cutting and efficiency measures taken under the financial turnaround plan. The airline made and operating loss of Rs 2,600 crore last fiscal.

The minister said that the carrier’s achievement of financial milestones ahead of time augured well for the company. According to the turnaround plan, Air India was supposed to turn cash positive by FY19-20 and report profit by FY21-22. But the company is now expected to be cash positive by FY17-18 and may report net profit by FY18. For the current fiscal, Air India’s net losses could come in at a much smaller Rs 2,636 crore, compared with losses of Rs 5,598 crore in the previous year.

“Falling fuel prices alone has contributed to savings of Rs 900 crore this fiscal. Additionally, we have managed to cut down the cost of operation by 6%,” Sharma said. However, he admitted that this is lower than the targeted 10%.

Speaking on declining budgetary support for the civil aviation ministry in the last three years, Sharma said that the trend was likely to continue as the government would push for self sufficiency of its undertakings.

“Except Air India, all the other undertakings affiliated to civil aviation ministry like Pawan Hans and Airport Authority of India (AAI) are making profits. A successful turnaround of Air India will mean our dependence on government support will further decrease,” Sharma said.

Under the turnaround plan, the government has committed for an equity infusion of Rs 30,231 crore in the carrier. Of this, Air India has already received Rs 22,280 crore so far. In Budget 2016-17, Air India was allocated another Rs 1,713 crore as part of the plan, against the airline’s demand of Rs 4,300 crore.

  1. S
    seshadri
    Mar 24, 2016 at 1:57 pm
    welcome move by government
    Reply

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