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Monday, 08 July, 2019, 14 : 30 PM [IST]

Government open to 100% stake sale in Air India with no funds allocated in Union Budget

Air India is ready with a plan to maximise its revenues and reduce costs so as to repay debt of INR 4,500 crore this fiscal even as the Union budget has not allocated any funds for the national carrier, two officials said. “Air India will have to increase its revenues by about 10% and reduce its cost by about same percentage to be able to raise the amount to repay its debt of about INR 4,500 crore,” a senior government official told ET on condition of anonymity. 

As per the proposed plan, the airline will launch new flights and increase its presence on profitable routes, the sources said. The airline is getting some benefit of the grounding of Jet Airways that has led to its premium class occupancy increase substantially on the international as well as domestic routes. The government has already taken over Air India’s debt of over INR 29,000 crore, thus, reducing the annual interest repayment burden for the airline by about INR 2,700 crore. 

It “is highly unlikely to offer anything extra to the airline”, said the second official cited earlier. Nirmala Sitharaman, Finance minister, Government of India did not announce any fresh fund infusion in the airline during her budget speech on Friday. Instead, she reiterated the government’s intent to divest stake in Air India. Air India had a debt of more than INR 54,000 crore on its books when the government unsuccessfully tried to sell 76% stake in it last year. The government then transferred about INR 29,000 crore of working capital debt into a special purpose vehicle — Air India Asset Holdings (AIAHL). 

With this, the airline’s annual interest payment liability had come down from INR 4,400 crore to about INR 1,700 crore. Total debt of the carrier, including that taken over by the government, has increased to over INR 58,000 crore now. The government has announced a bond issue of INR 7,000 crore to be raised by AIAHL, which will be used to repay the national carrier’s debt that has been transferred to the SPV. 

(Source: Economic Times)
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