NEW DELHI – National passenger carrier Air India might shut-down, if itsongoing divestment programme fails due to the terms and conditions set inits ‘Express of Interest’ (EOI) document.
According to aviation consulting firm CAPA India, it is critical for thecentral government to amend the labour and debt conditions for thedivestment process to succeed.
“Three key themes emerging on @airindiain divestment: 1) Critical thatterms in EOI – particularly for labour & debt – are amended, as successfulbidder will need to invest in restructuring and absorbing losses forseveral years, in addition to consideration paid for 76 per cent,” theconsulting firm tweeted on May 4.
“Three key themes emerging on @airindiain divestment: 2) Unless biddersconfident that they will be ring-fenced from possible political risks ifsuccessful, this could prove to be a key reason for possiblenon-participation by some parties at RFP stage. #indianaviation 2 of 3.”(sic)
Besides, the firm said that it estimates AI headed for “2-year losses ofUSD1.5-2.0 bn in FY19/FY20”.
The development comes few days after the central government extended thesubmission deadline for the EOI bids under Air India’s divestment processto May 31, 2018.
The ‘Corrigendum’ issued by the Ministry of Civil Aviation on May 1extended the last date for EOI bid submission to May 31, 2018 from May 14.
Consequently, the date for the “intimation to the Qualified InterestedBidders” (QIB) has also been extended to June 15 from May 28.
In addition, the ministry issued a separate document on clarificationssought by interested bidders regarding the divestment process.
On the total debt and liabilities which are expected to remain with AI atthe point of divestment, the ministry clarified: “… As on 31st March2017, including net current liabilities of INR 88,160 mn, aggregating toINR 333,920 mn will remain with AI and AIXL (no change for AI-SATS exceptin normal course of business).”
“Essentially, the amount of Rs 3,33,920 mn includes both debt andliabilities including net current liabilities.”
The clarification document outlined that net current liabilities as Rs88,160 million (Rs 8,816 crore) and “these will remain with AI and AIXL asthese have been incurred in the course of business.”
“After deducting INR 88,160 mn from INR 333,920 mn, the remaining figure ofINR 245,760 mn is the debt and liability quantum that will remain with AIand AIXL.”
On March 28, the central government had issued a Preliminary InformationMemorandum (PIM) inviting “EoI” for the strategic divestment of AI, alongwith the airline’s shares in AIXL (Air India Express) and AISATS (Air IndiaSATS Airport Services) from private entities including the airline’semployees.
The central government owns 100 per cent equity of Air India. In turn, theairline holds full stake in Air India Express, while it holds 50 per centstake in the joint venture AISATS.