The Central government on Tuesday invited “Expression of Interest” for strategic divestment of national flag carrier’s ground handling subsidiary Air India Air Transport Services Ltd (AIATSL).
To facilitate the divestment, Air India has entered into a share purchase agreement with a special purpose vehicle (SPV) — Air India Assets Holding Ltd (AIAHL) — which has been created to transfer a substantial portion of national carrier’s debt, earmarked assets and land banks.
As per the Preliminary Information Memorandum (PIM) released on Tuesday, AIAHL plans to sell at least 98 per cent stake in the company through strategic sale and offer up to 2 per cent to employees of AIATSL, as per the terms of an ESOP (employee stock ownership plan).
“AIAHL has given ‘in-principle’ approval for the strategic sale of AIATSL by way of transfer of management control and sale of 100 per cent equity share capital of AIATSL by AIAHL, out of which at least 98 per cent shall be through strategic sale…,” the PIM document said.
The subsidiary was incorporated in June 2003 to undertake ground handling and other activities on behalf of the airline.
In February 2013, Air India formally transferred the ground handling business of itself and its client airlines as well as cargo warehousing business and cargo handling to AIATSL.
Currently, the company provides services at 76 airports. Apart from handling the flights of Air India and its subsidiary companies, it also provides ground handling services to 37 foreign and 4 domestic airlines.
It had made a net profit of Rs 71.1 crore during 2017-18 (provisional) and Rs 33.4 crore in 2016-17.
The company had earned a revenue of Rs 668 crore during 2017-18 (provisional) and Rs 624.5 crore in 2016-17.
In November last year, an inter-ministerial panel, Air India Specific Alternate Mechanism, decided to divest the government’s stake in AIATSL.
The amount raised from the divestment of AIATSL would be used to retire some of the accumulated debt of Air India.
The inter-ministerial panel has decided to revive the national passenger carrier through the sale of land and other assets and to offload its debt to the SPV already incorporated.
Prior to the current move, the government had offered to sell a 76 per cent stake in Air India. However, the state-owned carrier group, which has accumulated losses of around Rs 55,000 crore, failed to attract any bidder.
According to Murali Ramachandran, CEO – India, Celebi Aviation: “We are very bullish about this whole opportunity and were, in fact, one of the first companies to send in an unsolicited EOI in 2017 when this initiative was being discussed. However, the PIM published today (Tuesday) prima facie seems inadequate in terms of information contained within.
“We will have lots of queries especially concerning tenure, rights, contracts, national carrier flight handling rights, employees etc. We will table our list of queries in the next few days. We are though concerned that the outcome of the recently concluded AAI Ground Handling tenders could have a negative impact on this opportunity.”