The government is planning to divest Air India Ltd’s ground handling arm before the end of the current financial year ending March 31 and is undertaking measures to cut costs across the board at the debt-laden airline, according to a senior government official.
Air India Air Transport Services, which is primarily involved in ground handling and cargo handling services, along with Air India Express are the only two profit-making subsidiaries of Air India out of its five arms, according to a reply given by the union civil aviation ministry to the parliament earlier this year.
“We are planning to divest the ground handling business, but no definite time frame has been laid down. However, it may happen before the end of this financial year," the government official told CNBC-TV18 adding that, date for floating the expression of interest will be fixed as soon as the “accounts are finalised" for 2017-18 (April-March).
The government will also look at divesting other arms of Air India, after seeing the response in this disinvestment exercise, the official added.
“Depending on the experience gathered, we would look at other subsidiaries since there is lot of value attached to it," the official said.
Other subsidiaries of Air India include Air India Express Ltd, Air India Engineering Services Ltd, Airline Allied Services Ltd and Hotel Corp of India Ltd. It also has a joint venture called Air India SATS Airport Services Pvt Ltd.
The attempt to divest the arm comes after the government failed to solicit even a single bid for 76 percent stake in Air India earlier in the year.
The airline, which had outstanding loans of over Rs 48,400 crore as on March 31, 2017, is also updating its lenders regarding more details about the debt transfer required under the special purpose vehicle.
CNBC-TV18 had reported last week that the government has decided to transfer Rs 29,464 crore of Air India's debt to a special purpose vehicle to clean up the distressed carrier's balance sheet.
In order to obtain approval from its lenders, the airline also conducted a meeting with a consortium of bankers on September 17 to "work out pre-conditions for shifting of loans" as shifting of loans from one entity to another will comprise second restructuring and would hence, require approval from the Reserve Bank of India.
“Banks wanted more details about this. We are in the process of updating them," the official said.
Meanwhile, the government is also working at improving the yield of the airline in the view of soaring oil prices and depreciating rupee.
“The yields are being slowly increased to negate the effect of an increase in fuel prices. Load factors on domestic has gone up to 82 percent and on international sectors have gone to 80 percent. More flights out of Mumbai are being launched. Costs are being reduced across the board,” the official further added.
While there are no plans to increase fleet of the carrier at the moment, the airline is undertaking monetisation of its land assets at a fast pace and has appointed Cushman & Wakefield to market its properties, the official said.
Chicago-based consultant Cushman & Wakefield was also asked to ascertain the value of Air India Ltd's building at Nariman Point, Mumbai, which is expected to be sold to Jawaharlal Nehru Port Trust.
“Advertisements have appeared in local newspapers. NBCC has been entrusted with the task of monetising Delhi properties namely Vasant Vihar and Baba Kadak Singh Marg,” the official said.
Under a turnaround plan approved in 2012, the airline was required to generate Rs 5,000 crore over a period of 10 years starting March 2012 by monetising its assets.
The national carrier has realised Rs 724 crore by monetising some of its assets and the proceeds are being used to reduce the airline's debt, minister of state for civil aviation Jayant Sinha had told Lok Sabha in a written reply in July.
The government has been infusing equity into the carrier since 2012 in order to help the airline pay all government-guaranteed aircraft loans and interest.
The turnaround plan also includes budgetary support amounting to Rs 30,231 crore spread over 10 years till March 2021 and equity support for payment of principal or interest of non-convertible debentures.
The airline has already received equity infusion of around Rs 27,200 crore till March.
First Published: Oct 3, 2018 8:23 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Delhi, Indore, Surat and Banswara — why these are the most challenging domains for Congress internally
May 4, 2024 1:53 PM
Congress nominee from Puri Lok Sabha seat withdraws, citing no funds from party
May 4, 2024 12:00 PM
Lok Sabha Polls '24 | Rahul Gandhi in Rae Bareli, why not Amethi
May 4, 2024 9:43 AM