Air India sale: Govt eyes at monetising Alliance Air, other AI subsidiaries

After the historic privatisation of Air India, the Union government has announced that it will begin to work on the monetisation of four of its other subsidiaries, including Alliance Air as well as non-core assets like land and buildings worth ₹14,700 crore, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said on Sunday, Tata Sons had on Friday won the Air India bidding at ₹18,000 crore to reclaim the debt-laden airline after nearly seven decades.

The government had been incurring an expenditure of ₹20 crore on a day to day basis to keep Air India afloat.

The Air India-Tata deal, which is expected to be completed by December-end, includes the sale of Air India Express and ground handling arm AISATS. The cost is inclusive of a cash payment of ₹2,700 crore and taking over ₹15,300 crore debt.

Meanwhile, the state-run airline had a total debt of ₹61,562 crore as on August 31. Of this, Tata Sons holding company Talace Pvt Ltd will take over ₹15300 crore and the remaining ₹46,262 crore will be transferred to the special purpose vehicle Air India Assets Holding Limited (AIAHL).

Besides, non-core assets of Air India including land and building, valued at ₹14,718 crore, are also being transferred to AIAHL. Further, liabilities of ₹15,834 crore towards dues to operational creditors, like those for fuel purchases, as of August 31 would be transferred to AIAHL.

Talking to PTI, Pandey said that his department will now get down to working out a plan for monetising the remaining subsidiaries of Air India which are with AIAHL and setting off the liabilities.

"There will be a plan for monetising the assets of AIAHL. It is a very big task again of clearing of AIAHL liabilities and disposal of assets. In the AIAHL, there is a company of ground handling, engineering and Alliance Air which have to be privatised ...Until Air India goes, we could not proceed with other things," said Pandey, who spearheaded Air India privatisation.

Air India Assets Holding Ltd (AIAHL) was set up by the government in 2019 for holding debt and non-core assets of the Air India group. Four Air India subsidiaries -- Air India Air Transport Services Ltd (AIATSL), Airline Allied Services Ltd (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India Ltd (HCI) -- along with non-core assets, painting and artefacts, and other non-operational assets, was transferred to the SPV.

"The dues to operational creditors may not go up further in the September-December period if the government continues with the funding... They are dependent on ₹20 crore/day, if the government shuts down funding then the dues will add up. So more or less it will not very much increase," Pandey said.

After adjusting for all the dues to lenders and operational creditors and also the assets of AIAHL, the net liabilities left with AIAHL is ₹44,679 crore.

Notably, Air India will become the third airline in the Tatas' stable giving it access to more than a hundred planes, thousands of trained pilots and crew, and lucrative landing and parking slots all around the world.

Tata Sons already own 84% stake in AirAsia India and 51% stake in Vistara.

Homecoming

Air India was founded in 1932 by Jehangir Ratanji Dadabhoy (JRD) Tata. It was initially called Tata Airlines until 1946, when the aviation division of Tata Sons was listed as Air India. In 1948, Air India became a public listed company and launched Air India International with flights to Europe in one of the first public-private partnerships in the country.

However, clouds of nationalization were hovering over the civil aviation sector from the time of independence. The airline was nationalised in 1953.

As per the deal, Tatas’ will have to retain over ₹13,500 crore employees of Air India and Air India Express for one year, post which a voluntary retirement scheme could be offered.

The conglomerate can go ahead with the merger and also sell up to 49 per cent stake after one year, but they ensure business continuity for three years.

The Air India brand and eight logos too would be transferred to the Tatas but it will have a 5-year lock-in and with the clause that they cannot sell them to a foreign entity.