The Indian Government has been given the go-ahead to establish a new Special Purpose Vehicle (SPV) to warehouse Air India Ltd.'s various operating subsidiaries as well as its debt mountain.
A Cabinet read out issued on February 28 said the Ministry of Civil Aviation (MOCA) had created Air India Assets Holding Ltd. (AIAHL) with its board consisting of the Chairman and Managing Director of Air India, Pradeep Singh Kharola, the Joint Secretaries of the MOCA, the Department of Expenditure, the Department of Economic Affairs, the Department of Investment and Public Asset Management (DIPAM), and the Director (Finance) Air India Ltd.
AIAHL will contain the subsidiaries that are not part of Air India's strategic disinvestment drive namely Air India Air Transport Services Ltd. (AIATSL); Airline Allied Services Ltd. (AASL) t/a Alliance Air (India) (9I, Delhi International); Air India Engineering Services Ltd. (AIESL); the Hotel Corporation of India Ltd. (HCI), as well as non-core assets including painting facilities and other non-operational Air India Ltd. assets. As of February 28, AIATSL has been transferred to AIAHL.
The SPV will also contain Air India's total debt pile of INR294.64 billion rupees (USD4.15 billion), a major encumbrance in last year's failed privatization drive.
"The disinvestment proceeds will be utilized to set off the working capital loan liability of Air India not backed by any asset [and which is] also warehoused in the same SPV," the readout said.
Last year, government attempted to sell a 76% stake in Air India Limited, 100% of Air India Express (IX, Delhi International), a wholly-owned subsidiary of Air India, as well as a 50% stake in Air India SATS Airport Services (AISATS), which provides groundhandling services at Delhi International, Hyderabad International, Bengaluru International, Thiruvananthapuram, and Mangalore Bajpe. However, given the need for would-be investors to assume INR333 billion rupees (USD4.69 billion) worth of debt, the sale garnered no bids.
According to India's interim Budget, presented on February 1, the government will avail a total of INR39 billion (USD549.3 million) to be used to service the Air India loans that have been transferred to the SPV. Of the total, INR13 billion (USD183.1 million) will be disbursed in 2019/20 with the remainder to be provided during the 2020/21 financial year.
