Work to monetise Alliance Air, 3 other subsidiaries of Air India to start now, says DIPAM Secretary

Tuhin Kanta Pandey said that DIPAM will now get down to working out a plan for monetizing the subsidiaries of Air India which are with the special purpose vehicle AIAHL (Air India Assets Holding Limited) and setting off the liabilities.

Air India subsidiaries
Air India subsidiaries

The DIPAM (Department of Investment and Public Asset Management) Secretary, Tuhin Kanta Pandey informed that after the historic Air India Privatisation, the central government will now start the work on monetizing Air India’s four other subsidiaries, including the Alliance Air, and over Rs. 14,700 crores worth non-core assets such as land and building.

The Government of India had announced on October 8, 2021, that salt-to-software conglomerate Tatas have won the bid to acquire debt-laden national carrier Air India for Rs. 18,000 crores. The deal included a cash payment of Rs. 2,700 crores and taking over Rs. 15,300 crores debt.

The deal, which is expected to be completed by the end of December 2021, also includes the sale of Air India Express and ground handling arm AISTAS.

Monetisation of Air India subsidiaries

Tuhin Kanta Pandey said that DIPAM will now get down to working out a plan for monetizing the subsidiaries of Air India which are with the special purpose vehicle AIAHL (Air India Assets Holding Limited) and setting off the liabilities.

He said that there will be a plan for monetizing the assets of AIAHL. It is a very big task again of clearing of AIAHL liabilities and the disposal of assets. In AIAHL, there is a company of engineering, ground handling, and Alliance Air which have to be privatized.

Pandey, who spearheaded the Air India Privatisation, added that it (sale of subsidiaries) cannot be started because these are all intimately linked. Unless and until Air India goes, we cannot proceed with other things.

What is AIAHL?

The Central Government in 2019, as a precursor to Air India Sale, had set up a special purpose vehicle- Air India Assets Holding (AIAHL)- to hold the debt and the non-core assets of the Air India Group.

Four subsidiaries of Air India- Airline Allied Services Ltd (AASL), Air India Air Transport Services Ltd (AIATSL), Hotel Corporation of India Ltd (HCI), and Air India Engineering Services Ltd (AIESL)- along with non-core assets, artefacts, and painting, and other non-operational assets, was transferred to SPV.

Key details:

Air India had a total debt of Rs. 61,562 crores as of August 31, 2021. Of this, Tata Sons holding company Talace Pvt Ltd will take over Rs. 15,300 crores and the remaining Rs. 46,262 crores will be transferred to AIAHL.

Besides, non-core assets of Air India including the building and land, valued at Rs. 14,718 crores are also being transferred to AIAHL. Further, the liabilities of Rs. 15,834 crores towards dues to operational creditors, like those for the fuel purchases, as of August 31 will be transferred to AIAIHL.

As per Tuhin Kanta Pandey informed between September 1 and December 31 just before the closing of the deal, the Central Government will work out a balance sheet of Air India.

After adjusting all the dues to the lenders and the operational creditors and also the assets of AIAHL, the net liabilities left with AIAHL is Rs. 44, 679 crores. The Government of India has been incurring the per day expenditure of Rs. 20 crores to keep Air India afloat.

Air India goes to back Tata Sons

While this will be the first privatization since 2003-2004, Air India will be the third airline brand in the Tatas stable and will give it access to more than a hundred planes, lucrative landing and parking spots, and thousands of trained pilots and crews.

The airline was founded by Jehangir Ratanji Dadabhoy (JRD) Tata in 1932 and it was called Tata Airlines then. In 1946, the aviation division of Tata Sons was listed as Air India, and in 1948, Air India International was launched with the flights to Europe.

Key points of deal between Air India and Tata Sons:

Tatas’ will have to retain over Rs. 13,500 crore employees of Air India and the Air India Express for one year, after which VRS will be offered.

The terms of the deal between Air India and Tata allow Tata to go ahead with the merger and also sell up to 49% of stake after 1 year but ensure the business continuity for three years.

The Air India brand and eight logos will also be transferred to the Tatas, however, it will have a 5 years lock-in and with a clause that they cannot sell them to a foreign entity.

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