‘Portion of working capital loan will be transferred to buyer’

The Centre may not takeover all of Air India’s ₹52,000 crore debt as part of the airline’s strategic disinvestment process and private players eyeing the national carrier are likely to be saddled with some of its outstanding loans, according to a top official at the civil aviation ministry.

“A portion of the working capital loan will be transferred to the private player which is essential in running the airline’s daily operations,” the civil aviation ministry official, who did not wish to be identified, said.

This assumes significance in light of the unsolicited expression of interest from India’s largest low-cost airline IndiGo for taking over Air India. While Indigo has appeared keen to acquire a stake in Air India, the airline has said it would not be prepared to bear the state-owned carrier’s unsustainable liabilities.

Air India has total debt of about ₹52,000 crore, comprising of ₹22,000 crore as aircraft loans and the rest as working capital loans and other liabilities. Air India has financed working capital through borrowings from a consortium of 25 banks.

“The new owner will take the airline’s reasonable working capital of around ₹4,000-₹5,000 crore,” another official said on condition of anonymity.

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Primary interest

IndiGo’s President and Whole-Time Director Aditya Ghosh told the budget airline’s employees in a letter last week: “Our interest in Air India is primarily in its international operations… In that journey, we are not going to take on debts and liabilities that could not be supported by the new restructured operations.”

Air India’s prime real estate properties spread across the country and abroad may not be a part of its stake sale process, the senior aviation ministry official said, adding that its aircraft, parking and landing slots, international air traffic rights, human resources would go under the hammer.

The privatisation process would not impact the national carrier’s air services agreements till the time substantial ownership and effective control vests with a domestic owner, the official added.

“Air India’s real estate, including land and buildings, and art treasures may not be a part of the disinvestment process. It may be hived off to a shell company,” the official said.

Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz, both in Mumbai, freehold land in Chennai’s Annasalai, an office in Baba Kharak Singh Marg, Connaught Place, New Delhi, and freehold land and buildings in Hyderabad. However, the airline has placed some of these as security with banks for availing loans.

As per its turnaround and restructuring plan approved in 2012, Air India is required to monetise its assets in India and globally and generate ₹5,000 crore through sale, lease or developing assets as joint ventures over a period of 10 years. In 2015-16, Air India earned about ₹90 crore from monetisation of assets as per provisional estimates.

The Cabinet last week approved in-principle the strategic disinvestment of Air India and formed a group of Ministers to examine modalities of the stake sale, including selling the subsidiaries and restructuring its debts.