The Indian government wants to sell loss-making Air India. File photo: Reuters

In its endeavor to sell off its loss making state-owned assets, the Indian government has come up with a new plan to privatize the state-run Air India (AI).

It may first divide the enterprise into two: AI and Air India Express (AIE), which operates low-cost flights to West Asia and South-east Asia, would be combined and put up for sale; another special purpose vehicle (SPV) that will include AI’s Rs 32,000-crore working capital debt, its other subsidiaries including Alliance Air and assets such as land and buildings, will be monetized later, reports Financial Express.

A Cabinet note detailing this plan has been prepared on the lines of the recommendations of a ministerial group headed by Finance Minister Arun Jaitley. They want to conclude the sale of AI-AIE by the end of the fiscal and undertake the balance transactions in due course, the daily added.

The prospective buyer of AI-AIE assets will get its headquarter in Delhi and 115 aircraft. But it will also have to get on board AI’s 12,000-strong workforce and take over the airline’s Rs 20,000-crore aircraft-related loans and AI’s Rs 8,000-crore dues to oil retailers.

Separately, the proposed SPV will negotiate for settling AI’s Rs 32,000-crore debt, which could see banks taking a haircut. During informal talks with the government, lenders to the carrier are understood to have expressed their willingness to negotiate.

AI’s physical assets include its aircraft fleet (including Boeing Dreamliners), land parcels/ buildings in India and abroad and also its valuable bilateral flying/landing rights and parking slots at airports across the world.

parliamentary panel meet on Monday witnessed sharp difference among the members on Air India privatization plan.
The committee, headed by Trinamool Congress leader Derek O’ Brien, convened the meeting to hear representatives of Air India employees’ unions as well as officials of various Air India subsidiaries on the proposed divestment of the airline.

While the trade unions were strongly opposed to the decision to privatize Air India, some Parliament members wanted to know why profitable ventures like Air India Express are being sold.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.