The government has firmed up a plan to exit the loss-making national carrier Air India, involving the write-off of roughly half of its estimated liabilities of Rs 60,000 crore, with a possible haircut by banks reducing the cost of the exercise to the exchequer. While the write-off is of the carrier’s liabilities not backed by assets, the government might also have to incur an expenditure for the settlement of the sovereign-backed part of AI’s aircraft loan of about Rs 21,000 crore, sources privy to the matter told FE. A third of the carrier’s aircraft loan is guaranteed by the government. A Cabinet note formulated in this regard is set to be discussed by the council of ministers headed by Prime Minister Narendra Modi soon, the sources said. However, they added that lenders to the carrier have in informal talks with the government expressed their willingness to negotiate with the government on how to settle the AI loans including re-setting interest rates to accommodate the government’s plan.
The sources added that the civil aviation ministry has also internally made a rough estimate of the value of AI’s physical assets including its 115-strong aircraft fleet (including Boeing Dreamliners), land parcels, buildings and also its valuable flying/landing rights and parking slots at airports across the world. “These assets are worth around Rs 25,000-30,000 crore,” a source said, adding that the government could quit AI by end-March 2018 and transfer it to a new private-sector owner.
Besides issues related to debt, the government would also have to take a call whether it would like to retain a minority stake in AI or not, another official said. It is understood that the Cabinet note doesn’t bar foreign airlines from participating in the acquisition of AI. Current FDI rules allow foreign airlines to buy up to 49% stake in Indian airlines.After the Cabinet gives its in-principle approval to the proposals by June-end, the government would appoint transaction advisers and asset valuers to take forward the divestment process.
While efforts have been made to revive the airline, AI has not reported a profit in at least a decade; in 2015-16 it posted an operating profit of Rs 105 crore and reduced its net loss to Rs 3,837 crore compared with Rs 5,859 crore in 2014-15.Retaining the airline in its fold is a much more expensive proposition for the government than transferring the ownership. The government will require to infuse amounts much higher than the Rs 50,000 crore proposed under a revival plan for AI if it decides to hang in there. The Centre has already infused Rs 28,000 crore in the airline over the past few years. The airline is incurring a cash loss of Rs 200 crore every month.