Air India May Be Broken Into 4 Companies Before Sale: Report

By Little India Desk | January 16, 2018

The government is planning to split Air India into four separate companies and sell at least 51 per cent in each of them as part of its disinvestment plan. The plan to disinvest the national carrier also caused an uproar in a parliamentary meeting on Jan.15, with some Opposition leaders staging a walk-out.

The core airline business, which is Air India and its overseas arm Air India Express, will be offered as one company, Minister of State for Civil Aviation Jayant Sinha said, Bloomberg reported. The process will be completed by the end of 2018, he added. Air India’s regional arm (Alliance Air), ground handling (AIATSL and JV company AISATS), and engineering operations (AIESL) will sold separately in the same process.

“The aviation sector is a very fast growing sector, with really exciting opportunities for all participants, so we felt all of this will unlock growth and competitiveness of Air India group,” Sinha said. “We expect it to be a very bright future for its employees.”

While Sinha did not name the potential bidders, he said the management control will be retained by local investors. By altering the foreign investment rules last week, the government, in effect, allowed foreign airlines to own as much as 49 per cent of Air India. Sinha said that investors’ interest will be sought by the end of this month.

The government will take on the non-core debt of the carrier to put on its own balance sheet while debt linked to its core operations will be put on the unit on offer. Air India, which carries debt of about $7.9 billion, is currently living on a government bailout. Finance Minister Arun Jaitley said last year that the money spent on Air India could be used for education.

Air India, with its five subsidiaries and a joint venture, has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. Due to the slide in oil prices, the company made an operating profit of about Rs 1 billion in the year through March 2016, but still had a net loss of Rs 38.4 billion.

Among those reported to have shown interest in acquiring Air India’s operations are IndiGo, run by InterGlobe Aviation Ltd, and the Tata group. Turkey’s Celebi Aviation Holding, Bird Group, Menzies Aviation Plc and Livewel Aviation Services Pvt. Ltd. are also said to have expressed keenness in the national carrier’s subsidiaries.

Meanwhile, the government’s plan of Air India’s disinvestment itself brought on a heated debate in a meeting of the Parliamentary Standing Committee on Transport, Tourism and Culture, with members of the ruling party BJP and the Opposition engaging in a war of words on Jan. 15. During the meeting, the BJP and its allies rejected the recommendation in the draft report that the government should defer its plan to disinvest its stake in Air India by five years.

BJP MP Rakesh Singh, who was acting as the chair for the meeting in absence of TMC leader Derek O’Brien, announced that 16 members (BJP and allies) of the 31 had signed in favor of disinvestment. When he said the panel will withdraw the draft report opposing the disinvestment, three opposition members — Kumari Selja (Congress), Arpita Ghosh (Trinamool Congress) and independent politician Ritabrata Banerjee — walked out of the meeting saying that only the full time chair (O’Brien) has the power to withdraw the report, PTI reported.