Tibarn Posted July 1, 2017 Share Posted July 1, 2017 Quote Cabinet approves Air India disinvestment, panel to decide timeline and procedure The Indian government on Wednesday gave an in-principle nod for disinvesting its stake in Air India. Quote The Union Cabinet on Wednesday formally approved the privatisation of national airline Air India Ltd and five of its subsidiaries. Disclosing this, finance minister Arun Jaitley said at a press briefing that he would be heading a group to work out procedures for the Air India disinvestment. The move will not only embellish the credentials of the National Democratic Alliance (NDA) as a reformist administration, but also ease the fiscal pressure on the union government — especially in indirectly servicing the airline’s outstanding debt burden of Rs52,000 crore. The group under Jaitley will decide on the treatment of unsustainable debt of Air India, hiving off certain assets to a shell company, spinning off and selling stakes in three profit-making subsidiaries, the quantum of disinvestment, and the eligibility criteria for the bidders, the government said in a statement. This group will then report back to the Union cabinet for final approvals. The constitution of the group will be done “quite fast”, Jaitley said without mentioning any timelines. Air India was launched in 1932 by JRD Tata as Tata Airlines. Its name was changed to the current one in 1946. The government decided to take it over in 1953. In 2000 too, also under a Bharatiya Janata Party (BJP)-led government, there was a move to privatize Air India but it went nowhere. The airline has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations. Apart from the planes, the airline also has vast land holdings, including nearly 32 acres in central Mumbai, besides its iconic headquarters on Marine Drive valued at more than Rs 1,600 crore. It also has properties in New Delhi, London, Hong Kong, Nairobi, Japan and Mauritius. Quote “The last 10 years have shown that in its current avatar Air India cannot be transformed into a great airline under government ownership ,” said former Air India executive director Jitender Bhargava. “It’s good that the government is acting swiftly as time is not on Air India’s side because the longer you delay the more marginalized Air India gets.” Because there is bound to be opposition to the move, the government should justify it using facts and figures, Bhargava said. Emphasis should be laid equally on the debt and also the huge assets the airline has so that the privatisation is not treated as a “distress sale,” he added. The airline has so far received Rs 23,993 crore of the Rs 30,231 crore equity infusion promised by the government under a financial restructuring plan in 2012. It reported a loss of about Rs 3,587 crore in 2015-16, compared with a loss of Rs 5,859 crore in the previous year. The Economic Survey 2017 recommended that the government privatize Air India. Late last month, finance minister Jaitley disclosed that the aviation ministry had been asked to look at all options of privatization. A committee of top bureaucrats which included civil aviation secretary RN Choubey then sent its views on Air India’s divestment to the Department of Investment and Public Asset Management (Dipam), which moved the cabinet note that was approved on Wednesday. Massive move I'm still disappointed there isn't a disinvestment ministry in the current government, but getting rid of Air India is hitting one of the big targets of disinvestment. velu 1 Link to comment Share on other sites More sharing options...
Tibarn Posted July 2, 2017 Author Share Posted July 2, 2017 http://www.thehindu.com/business/Economy/debt-biggest-challenge-for-air-indias-disinvestment/article19165763.ece Quote Debt biggest challenge for Air India's disinvestment Quote The Group of Ministers headed by Finance Minster Arun Jaitley will take a call on key issues that will make debt-laden Air India’s stake sale to private playersmore attractive. The Ministerial group will consider hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step toward clearing up its balance sheet. “The Civil Aviation Ministry had proposed forming a SPV housing a substantial portion of its working capital loan and assets,” a senior ministry official said, on the condition of anonymity. “The sale of Air India’s prime real estate assets will help in meeting its liabilities,” the source said. Air India has a total debt of around ₹52,000 crore which comprises of ₹22,000 crore as aircraft loan and the rest as working capital loan and other liabilities. Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz in Mumbai, freehold land in Chennai’s Anna Salai, an office in Baba Kharak Singh Marg in Connaught Place in New Delhi and freehold land and buildings in Hyderabad. However, the airline has mortgaged some of these as security with banks for availing loans. The Government may also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries: its MRO unit Air India Engineering Services Limited, ground handling arm Air India Transport Services Limited and Air India Charters Limited. “The proceeds from disinvestment of Air India’s subsidiaries may further help in clearing Air India’s debt,” a senior Air India official said which operates Air India Express. Its other subsidiaries include: Airline Allied Services Ltd which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels) along with a joint venture AISATS. Air India has made unsuccessful attempts in the past to clear its over Rs 50,000 crore debt, including asking banks to convert a part of loans into equity share and asking Reserve Bank of India to provide concessions for debt restructuring. An official statement by Civil Aviation Ministry said on Wednesday that the Ministerial group will frame its recommendations on “treatment of unsustainable debt of Air India”, “hiving off certain assets to a shell company,” among others. Various Ministries are still divided over the quantum of stake sale in Air India and the Ministerial Group will now take a final call on the matter. While government think-tank NITI Aayog and Finance Ministry favour a complete privatisation, Civil Aviation Ministry aviation ministry is keen that the government continues to remain a stakeholder in the national carrier after handing over its management to the private sector. Whoever the Civil Aviation Minister is should be sacked. Useless fellow IMO. Link to comment Share on other sites More sharing options...
velu Posted July 2, 2017 Share Posted July 2, 2017 somehwere i read it was profitable till they placed massive orders which is against the recommendtations Link to comment Share on other sites More sharing options...
Haarkarjeetgaye Posted July 5, 2017 Share Posted July 5, 2017 Will they make enough to pay off the debt or will it go from tax payers money Link to comment Share on other sites More sharing options...
velu Posted July 6, 2017 Share Posted July 6, 2017 12 hours ago, Haarkarjeetgaye said: Will they make enough to pay off the debt or will it go from tax payers money so far air india is surviving because of governemnts credit line which mean its burning tax payers money already Link to comment Share on other sites More sharing options...
Haarkarjeetgaye Posted July 6, 2017 Share Posted July 6, 2017 3 hours ago, velu said: so far air india is surviving because of governemnts credit line which mean its burning tax payers money already Yes. But when they disinvest, who will cover for that credit line. It will be written off if they don't make enough by selling it Link to comment Share on other sites More sharing options...
velu Posted July 6, 2017 Share Posted July 6, 2017 14 minutes ago, Haarkarjeetgaye said: Yes. But when they disinvest, who will cover for that credit line. It will be written off if they don't make enough by selling it i dont think banks will take a big haircut .. governemnt might settle some debt , and i guess some will be passed to the new entity Link to comment Share on other sites More sharing options...
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