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with Talace and the sale of the airline in entirety is expected to be The EV construct allowed the bidders to bid
completed by December 2021. Air India’s successful disinvestment on the total consideration for equity and debt
is a major victory for the Government. Over the last decade suc- instead of a pre-determined, fixed debt with
cessive Governments have been forced to pump in approximately minimum cash consideration of 15% for equity.
Rs1 trillion to keep the airline afloat. As per both the original and revised construct,
all non-core assets (land, buildings, etc.) were
Attractive Proposal to be transferred to AIAHL and hence not a
The original construct as per the January 2020 PIM envisaged part of the transaction.
that a pre-determined, fixed amount of debt would be retained
in AI, while the balance would be transferred to Air India Asset With these changes, the Government received
Holding Limited (AIAHL). It was also decided that the sum of cer- seven EOIs in December, 2020 for Air India,
tain identified current and non-current liabilities (other than debt) however, five of the bidders were disqualified
to be retained in AI and AIXL would be equal to the sum of certain as they could not meet the requirements set out
identified current and non-current assets of AI and AIXL (excess in the PIM/EOI. The Government was able to
liabilities to be transferred to AIAHL). issue the Request for Proposal (RFP) and draft
Share Purchase Agreement (SPA) on 30 March,
The disinvestment timeline was further impacted due to the 2021 and the bid due date was extended to 15
COVID-19 pandemic and in view of the excessive debt and other September, 2021 on the request of the bidders,
liabilities of Air India arising out of huge accumulated losses, the so that they could complete their due diligence
Government revised the bidding construct in October 2020 to before submission of bids.
Enterprise Value (EV). This allowed prospective bidders an oppor-
tunity to resize the balance sheet and increase the Government’s Potential for Profit
chances of receiving more bids and creating greater competition. AI has the following wholly owned subsidiar-
ies: AI Airport Services Limited (AIASL), Air
India Express Limited (AIXL), AI Engineering
Services Limited (AIESL) and Alliance Air
Aviation Limited (AAAL), while AISATS Airport
Services is a 50:50 JV between Air India and
Singapore Airport Terminal Services (SATS).
AI also holds 80.38% equity shares of Hotel
Corporation of India Limited (HCI). The con-
solidated net loss of AI and is subsidiaries in
2019-20 stood at Rs77 billion as compared to
the previous year’s loss of Rs88 billion. The
total permanent and contractual employee
strength of Air India & AIXL which stands at
13,500 will also prove a challenge for the Tata’s
as they seek to right size and make the airline
more efficient.

It could be encouraged however, by AIXL’s per-
formance, which achieved its highest net profit
of Rs4 billion in FY 2019-20.
This was also its fifth consecutive year of
profits. AIXL carried 48.4 lakh passengers in
FY 2019-20, as compared to 43.6 lakh pas-
sengers the previous year (a growth of 11 per
cent). This included 46.6 lakh passengers who
travelled on AI’s international sectors. The LCC
also achieved its highest ever daily average
aircraft utilization at13.4 hours per day, across
its 737-800 NG fleet. Air India operates an all
Boeing long-haul fleet comprised of B-787s,
B777-200 LRs and B777-300ERs. In addition
to this it operates A320 NEOs and A319s. AIXL
operates an all-Boeing fleet of 737-800 NGs
and could be a potential customer for the more
modern and fuel-efficient 737 MAX whose only
other operator in India is SpiceJet.

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