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Thursday, Sep 19, 2019

Government may go for 100% stake sale in cash-strapped Air India

Air India is in the grip of a major financial crunch and on Thursday, Indian Oil Corp stopped fuel supply to the airline at Ranchi, Mohali, Patna, Vizag, Pune and Cochin airports, owing to non payment of dues.

india Updated: Aug 24, 2019 09:45 IST
Faizan Haidar
Faizan Haidar
Hindustan Times, New Delhi
While flights of Alliance Air, a subsidiary of Air India were affected, the state-owned airline itself managed by carrying extra fuel while operating to these destinations.
While flights of Alliance Air, a subsidiary of Air India were affected, the state-owned airline itself managed by carrying extra fuel while operating to these destinations.(Reuters)
         

It can’t get fuel in six airports — supply has been stopped on account of payment issues — and has no money to pay salaries beyond October, making a ministerial group’s meeting next week to decide on the next steps in privatising it, all the more important for Air India.

Reconstituted after the NDA returned to power in May, the group of ministers (GOM) is likely to meet next week to decide on the modalities of sale of the state-owned airline. The government is likely to go for 100% sale this time, people in the civil aviation ministry said.

“Before the first meeting of GOM, we will have an internal meeting on Air India and once the first meeting is done, the process related to sale will begin,” Hardeep Puri, the civil aviation minister, had said on August 16.

Air India is in the grip of a major financial crunch and on Thursday, Indian Oil Corp stopped fuel supply to the airline at Ranchi, Mohali, Patna, Vizag, Pune and Cochin airports, owing to non payment of dues.

While flights of Alliance Air, a subsidiary of Air India were affected, the state-owned airline itself managed by carrying extra fuel while operating to these destinations.

According to the people, Ashwani Lohani, chairman and managing director of Air India, has already intimated the ministry about the funds crunch.

Air India needs ~300 crore per month for salaries and doesn’t have the money to pay salaries beyond October.

The GOM comprises home minister Amit Shah, finance minister Nirmala Sitharaman, commerce and railway minister Piyush Goyal and civil aviation minister Hardeep Singh Puri.

The panel, named Air India Specific Alternative Mechanism (AISAM), is likely to meet next week following which a Request for Proposal (RFP) will be issued.

“In the absence of equity support, Air India cannot handle its huge debt service liabilities. Our financial performance this fiscal has been very good and we are moving towards a healthy operating profit. The airline, despite its legacy issues, is performing very well,” Dhananjay Kumar, the spokesperson of Air India, said on Thursday.

The airline has prepared a revenue plan for 2019-20 after incurring loss of about ~4,000 crore in 2018-19; it already has ~55,000 crore of debt on its books. With a revenue target of ~31,000 crore this financial year, the national carrier is targeting an operational profit of ~1000 crore at the least.

To raise money, the airline is also selling property in various states. According to an Air India official familiar with the matter, the money generated from these sales will go to Special Purpose Vehicle (SPV) formed by civil aviation ministry by the name of Air India Asset Holding limited.

The government has already decided to transfer ~29,000 crore of the total ~55,000 crore debt of Air India to this SPV, which is also tasked to raise money through land deals and other measures. The government has made it clear that Air India will have to cut costs and grow revenues if it wants financial support from the government.

First Published: Aug 24, 2019 05:56 IST