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Wednesday, 22 August, 2018, 11 : 00 AM [IST]

Govt considers housing Air India’s debt & non-core assets in SPV

As per a Mint report by Remya Nair, the government is considering a proposal by Air India’s board to house its non-core assets and unsustainable debt in a special purpose vehicle (SPV), a senior government official said on Tuesday. This will help the airline leverage its assets and help in its turnaround, the official said adding that the government has no plans of providing additional capital support over and above what has been budgeted.

One round of talks has already taken place between the Finance and Civil Aviation Ministries on this proposal, the official said.

This follows the government’s failed attempt to divest its stake in Air India. In April, the government had invited bids for a 76% stake in Air India Ltd, along with a 100% stake in its subsidiary Air India Express Ltd, and 50% in Air India SATS Airport Services Pvt. Ltd. However, it did not receive any bids as investors were wary of potential government interference as it would retain a 24% stake. Further, the fact that Air India and Air India Express were to retain INR 33,392 crore of debt and lack of details about employee protection proved to be a damper and so did the high prices of aviation turbine fuel. The government eventually decided to drop its privatisation plan stating that the time was not right for the deal.

Air India has a 42.8% share of international traffic to and from India among homegrown carriers, and a 12.3% share of the domestic market.

The Central government had budgeted INR 650 crore towards the turnaround plan of Air India and another INR 1,156 crore as investment in Air India. In addition to this, it sought Parliamentary approval last month to infuse an additional equity of INR 980 crore into the debt-ridden airline. (Source: Mint)
 
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