The minister said the contingent liabilities due to retired employees will be clarified at the request for proposal (RFP) stage. (Photo: File)
All employees of the airline will go with the new management and the new company will have to retain the Air India brand.
New Delhi: Making a second attempt to sell off debt-laden Air India, the government on Monday approved the release of the Preliminary Information Memorandum (PIM) for inviting Expressions of Interest (EOI) from bidders for the “strategic disinvestment” of the airline.
While making the announcement, minister of state for civil aviation Hardeep Singh Puri said unlike 2018, when the government had proposed to offload 76 per cent of its equity capital, the government has now decided to sell 100 per cent of its stake in Air India and set March 17 as the deadline for expressions of interest. All employees of the airline will go with the new management and the new company will have to retain the Air India brand.
The entire disinvestment process is being looked after by the Air India Specific Alternative Mechanism (AISAM), headed by Union home minister Amit Shah, with the ministers for commerce and industry, finance and corporate affairs and civil aviation as its members.
While noting that Air India flies to 98 destinations, with 56 domestic and 42 international routes, and a passenger load of roughly 26 million in 2018-19, Mr Puri said even after the infusion of about Rs 30,500 crores since 2012, Air India has been running into losses year after year.
“Due to its accumulated debt of about Rs 60,000 crores, its financial position is in a very fragile condition and Air India is currently under a debt trap. Any private investor can turn it around and make Air India profitable by bringing operational as well as financial efficiencies,” the minister said.
He said the government has limited financial resources, but the private investor can bring in the required capital for its turnaround.
After drawing a complete blank in its first attempt to sell Air India in 2018, the minister said lessons were learnt and critical areas analysed to make the disinvestment bid now more attractive. Among the key decisive parameters in this PIM are the decision to transfer management control and sale of 100 per cent shares of Air India along with Air India’s 100 per cent stake in its subsidiary, Air India Express Ltd, and 50 per cent stake in AISATS, a joint venture.
A decision has also been taken on the freezing of debt in Air India at Rs 23,286.50 crores, which is approximately equivalent to the written down value (WDV) of the joint assets of Air India and Air India Express. The liabilities to be retained in Air India will be equal to certain current and non-current assets. Considering the combined figures as on March 31, 2019, the liabilities retained would be Rs 8771.50 crores. The remaining debt and liabilities of Air India and Air India Express will be allocated to SPV (Air India Assets Holding Ltd) and the contingent liabilities related to statutory dues and government dues will be indemnified by the government.
The minister said the contingent liabilities due to retired employees will be clarified at the request for proposal (RFP) stage. The corporate guarantees given by Air India on behalf of Alliance Air will not be passed to the new investor. All the land and building assets, including the paintings, art works and artefacts, will not be part of the transaction. However, certain land and buildings in New Delhi and Mumbai airports and the corporate office that are core assets to run the airline, will be given to the new investor on a “right to use” basis for a limited period.
The bidding structure on forming the consortium has been eased, compared to the last round of bidding, and the financial capability of prospective investors has also been made more attractive such as lowering of net worth criteria to Rs 3,500 crores, and net worth qualification of the investor based on the strength of its affiliate, the minister said.
It has been decided the individual member must have at least 10 per cent share in the consortium, roughly amounting to Rs 350 crores. Air India, under the new investor, will continue using the “Air India” brand.
The minister said the government had committed to pay certain employees’ dues before closing the transaction. Employees’ dues of about Rs 1,383.70 crores due to the Justice Dharmadhikari Commission’s recommendations on past arrears will be paid by Air India Assets Holdings Ltd before closing of the proposed transaction.
“Provision for Rs 207.63 crores towards wage arrears accruable to employees working on narrow body fleet has been made in the books of accounts of Air India. The treatment of this liability may be provided at the RFP stage,” the minister said, adding that three per cent of the equity shares of Air India will be offered to permanent employees of Air India as ESOPs.
The total employee strength of the two companies is 17,984, out of which 9,617 are permanent employees and about 36 per cent of permanent employee will be retiring in the next five years. AISATS has 11,958 contractual staff, and 399 employees are deployed from Air India and other subsidiaries.