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Air India divestment options uncertain

By IndianMandarins- 19 Sep 2020


The government is given four options on dealing with the divestment issue of the debt-ridden Air India. However, it is uncertain whether the government may be able to work on any of the given options in FY21.
A report submitted by Ernst & Young India, which is the transaction adviser on the issue, to the inter-ministerial group set up to coordinate and sort out issues regarding AI divestment, contains the following four options:
First, keeping the debt level at Rs 23,286 crore or reducing it further while changing the timelines.
Second, assigning no pre-fixed debt level and letting bidders quote a combined debt and equity value.
Third, the Government should continue running AI for the next 2-3 years.
Fourth and last, winding up AI thereafter.
The report points out that in view of the corona virus-induced global and domestic economic downturn, potential investors in the airline business are seen struggling to manage their own existing businesses. In this climate, it is difficult to predict how the divestment proposal of AI may be received, considering the company has a combined debt-cum-liabilities burden of about Rs 90,000 crore.
“The choice is between privatizing or closing down Air India,” Aviation Minister H. S. Puri recently stated in the Parliament. Based on the suggestions, the core group of secretaries and the ministerial panel handling the sale of the national carrier will decide the future course of action although it is unclear if the government will be able to decide on the much-delayed privatization during the current year.

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