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Govt panel to consider Air India debt write-off

LiveMint logoLiveMint 27-07-2017 Tarun Shukla

New Delhi: The aviation ministry and the Department of Investment and Public Asset Management (Dipam) will on Friday present to a ministerial panel their recommendation on the amount of debt that needs to be written off Air India’s books to make the state-owned airline attractive to potential investors, a government official said on condition of anonymity.

Dealing with Air India’s debt of just under Rs50,000 crore is a key step—the most critical one, according to some analysts—in the government’s plan to divest part or all of its stake in the airline.

Friday’s meeting is the second of the ministerial panel tasked to speed up this process. Apart from the Tata group and IndiGo, private equity funds KKR and Co. Lp and Warburg Pincus Llc have expressed interest in acquiring Air India’s businesses, Mint reported on 24 July.

The ministerial panel comprises finance minister Arun Jaitley, aviation minister Ashok Gajapathi Raju, transport minister Nitin Gadkari, railway minister Suresh Prabhu and power minister Piyush Goyal. The panel met first on 21 July. Gadkari did not attend that meeting as he was travelling.

At that meeting, Air India made a detailed presentation, after which the ministers asked the aviation ministry and Dipam to prepare a note on the options to deal with the airline’s debt, Mint reported on 25 July.

“Friday’s meeting is expected to discuss these options,” the government official cited in the first instance said.

Air India had total debt of about Rs48,877 crore at the end of March 2017, of which about Rs17,360 crore were aircraft loans and Rs31,517 crore were working capital loans.

The airline has about 17% share of traffic on routes linking India to international destinations and 13% of the domestic market. It also has valuable real estate, bilateral flying rights and sought-after overseas airport slots.

IndiGo (InterGlobe Aviation Ltd), the largest airline in the country, has publicly expressed interest in Air India, while the Tata group, which started the airline in 1932 before it was nationalized, has also sought details from the government in informal conversations, Mint reported on 20 July.

Steve Forte, the New York-based former CEO of Jet Airways (India) Ltd, said the government needs to keep in mind that privatization is not a dumping exercise.

“If the government (taxpayers, really..) decides to absorb all the debt and sell Air India clean, it would be a great buy,” he added.

The airline has so far received Rs23,993 crore of a Rs30,231 crore equity infusion promised by the government under a financial restructuring plan in 2012. It reported a loss of about Rs3,587 crore in 2015-16, compared with a loss of Rs5,859 crore the previous year.

NITI Aayog, the government think tank, had cited Air India’s “fragile finances” as the main reason for recommending the airline’s disinvestment on 12 May.

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