Air India caters to 42 international destinations in 27 countries and 72 domestic stations with its subsidiaries. Air India caters to 42 international destinations in 27 countries and 72 domestic stations with its subsidiaries.

The Cabinet committee of economic affairs (CCEA) has finalised a three-pronged strategy for the disinvestment of Air India — demerger and strategic disinvestment of three profit making subsidiaries, hiving off of certain assets into a special purpose vehicle and treatment of unsustainable debts of the ailing carrier. The three profit-making subsidiaries are the low-cost airline Air India Express Ltd, the ground handling company Air India Air Transport Services Limited and Air India’s joint venture with SATS Limited for ground handling activities in Delhi, Mumbai, Trivandrum and Bengaluru.

The process will be piloted by the Air India Specific Alternative Mechanism (AISAM) comprising finance minister Arun Jaitley, civil aviation minister Ashok Gajapathi Raju, transport minister Nitin Gadkari, Railways minister Suresh Prabhu and power minister Piyush Goyal. In addition to laying a roadmap to take care of the massive debt that Air India has incurred over the years, the assets that are to be incorporated in the ‘shell companies’, the committee will also decide on the quantum of disinvestment of the parent company and its subsidiaries and take decisions about the bidders. The decision was taken at a CCEA meeting on June 28.

The Niti Aayog had submitted its recommendations on the strategic disinvestment of Air India and five of its subsidiaries on May 12, citing the carrier’s monthly losses to the tune of Rs 200-250 crore as the primary reason why such a move is required. Air India’s cash deficit is expected to double from Rs 1,050 crore in 2015-16 to Rs 2,069 crore in 2016-17, according to the provisional figures in a report submitted by the ministry of civil aviation to the standing committee on transport, tourism and culture.

In a note the ministry has argued that since there are several Indian owned private airlines operating in the domestic and international sectors, there is no need for the government to be involved in the aviation business. Air India caters to 42 international destinations in 27 countries and 72 domestic stations with its subsidiaries. The airline has 142 aircraft including 15 wide-body B777s, 24 B787s and four B747 aircraft and 65 narrow-body A320s. Its subsidiary Air India Express has 23 B737-800 aircraft and Alliance Air has a fleet of 11 ATR 72 aircraft.

The ministry has informed the Parliamentary panel: “The decision to acquire a large number of aircraft in excess of Rs 50,000 crore unleashed a pile of debt from which AI has never recovered. The infusion of capital in the company as per the turnaround plan of 2012 was not sufficient to cover the cash deficit. The turnaround plan focused only on equity infusion without any plan for re-engineering the processes.”

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