An Air India plane (PTI Image)
An Air India plane (PTI Image)


Will Writing Off Air India's Debt Help It Find A Buyer? Outgoing Niti Aayog VC Arvind Panagariya Doesn't Know Either


Outgoing Niti Aayog Vice Chairman Arvind Panagariya has said that writing off some debt of Air India, so as to make it attractive to prospective investors, could be a "wise" move. Following a suggestion by the Niti Aayog, the government is endeavouring to privatise the state-owned carrier and a committee has been set up under Finance Minister Arun Jaitley to carry forward the process.

"I don't know whether you need to write off debt to find a buyer, I don't know the market. Transaction advisers are competent on that," Panagariya told PTI in an interview. "I am just saying that it's probably wise to write off part of the debt before this happens (privatisation of Air India)," he added.

On whether there's a need for asset stripping before sale of the national carrier, he said, "No, why would you do asset stripping. It's a well running, well-functioning Airline." Panagariya, who will leave the Niti Aayog this month to return to academia in the US, further said that there are details which need to be sorted out by the transaction advisers.

With regard to the real estate holdings of the Air India, Panagariya said: "Real estate part is a separate issue... We made some recommendations and all but not to the level of that details to keep this and sell this."

Citing provisional figures, Minister of State for Civil Aviation Jayant Sinha recently had said Air India's total debt stood at almost Rs 48,876 crore (~$7.6 billion) at the end of March 2017. Out of the total amount, Rs 17,359 crore ($2.7 billion) comprises aircraft loans, while Rs 31,517 crore ($4.9 billion) is working capital loans.

The previous UPA regime had extended a bailout package worth a little over Rs 30,000 crore to the national carrier for 10 years starting from 2012. "Air India is facing financial pressure and earning less profit due to high debt burden as an offshoot of past accumulated losses. The debt servicing is at around Rs 6,000 crore per annum", Jayant Sinha had said.

The Union Cabinet on June 28 gave in-principle approval for the disinvestment of debt-laden Air India. The Jaitley-headed group of ministers is finalising the modalities and held its first meeting last month. IndiGo, the country's largest airline with a domestic market share of a little over 41%, is keen on snapping up the international operations of Air India as well as its profitable low-cost arm Air India Express.

As an alternative, the budget carrier is "equally interested" in buying out all the operations of Air India and Air India Express, according to the letter sent by IndiGo President Aditya Ghosh to the Civil Aviation ministry.