Govt may sell minority stake in Air India

At long last, the Narendra Modi government is contemplating minority stake sale in Air India, though privatization is still far away. The loss-making state carrier has a total debt worth Rs 50,000 crore.

The stake sale, however, is contingent upon it getting in the black, whose chances have brightened, one reason for which is lower crude prices. Earlier the turnaround was estimated to have happened in 2020-21, but now it is estimated in 2018-19.

The options mulled include restructuring of the Rs 10,000-crore term loans with government guarantee-backed non-convertible debentures and conversion debt into equity to bring down government stake to 51 per cent. State Bank of India is lead banker in the consortium, which has 25 other members, to the state carrier.

The conversion of debt into equity will take place after the turnaround. According to a Business Standard report, “Air India weighs options to cut government stake to 51 per cent. Air India plans to reduce its losses by 40 per cent to Rs 2,000 crore in FY17 and a financial restructuring plan is underway to achieve this goal. Lower oil prices are helping the ailing carrier’s turnaround plan. Earlier, half its routes were loss-making but in the April 2015 to January 2016 period, 75 per cent of routes have turned profitable.”

In an earlier interview to the newspaper, chairman & managing director Ashwani Lohani had said, “There is a huge backlog of past loans and we are servicing that debt. Even with all these loans, we are targeting a net profit by FY18.”

Over the years, private airlines have been giving tough competition. As a consequence, AI’s market share has dropped to 15.7 per cent.

AI privatization is not on the cards.

It may be recalled Arun Shourie, disinvestment minister in the Vajpayee government, had tried to privatize AI, but the move was defeated because of, among other things, aggressive lobbying by Naresh Goyal of Jet.