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Piling up: Air India debt rises Rs 5,000 crore in H1

Prasanta Sahu

The total debt and liabilities of Air India (AI) have risen to over Rs 45,500 crore at  September end, up Rs 5,000 crore from the level seen after the April takeover of its Rs 29,464-crore debt by the Centre through a special purpose vehicle, sources told FE.

The increase over the first half of this fiscal is largely due to short-term loans, an official source said. At the end of last financial year, the state-run airline's debt had stood around Rs 70,000 crore. The Centre was planning to make the ailing Air India virtually debt-free by taking over an additional Rs 20,000 crore from its books before offering its entire stake along with asset-backed loans of Rs 20,000 crore to the prospective bidders.

It is not clear whether the additional liabilities of Rs 5,000 crore would also be absorbed by the Centre before the sale.

If the potential buyer takes over residual Rs 25,000 crore debt, it would be higher than the roughly Rs 20,000 crore assets of the national carrier, largely consisting of its 70-strong fleet of aircraft.

The AI's debt and liabilities were inclusive of long-term and short-term loans and other dues such as to state-run oil companies.

In June last year, the government called off the proposed sale of 76% stake in AI after no buyer showed interest. Probable reasons as analysed by the transaction adviser EY for non-receipt of bids last year included the government's decision to retain 24% stake and corresponding rights, high amount of allocated debt, profitability track record and among others.

In its fresh attempt, the Centre is planning to sell its entire stake in the airline and share actual "sale and purchase agreement (SPA)" with prospective bidders at the EoI (expression of interest) stage itself to help them take long-term view of the various liabilities and accordingly plan their funding for the deal. Over the last few days, the aviation ministry and AI management have been holding a series of meetings to finalise the carrier’s accounts.

The premium bilateral rights and parking slots owned by the national carrier across the world are what the prospective buyer will have to really pay for. AI owns 70 planes, including wide-body Boeing 787-800 Dreamliners, and 58 planes are on lease.

It is expected that a foreign airline may tie-up with an Indian airline/investor to bid for the national carrier. The current FDI rules allow foreign airlines to buy up to 49% stake in domestic carriers.

AI is surviving on taxpayer bailouts after losing money