The sale of the debt-ridden Air India to Tata Sons is a "momentous day for 130 crore people and India's civil aviation", Union Minister Jyotiraditya Scindia told NDTV today. The Civil Aviation Minister said he is confident that the sector, which has been particularly hit hard by the slowdown in travel amid the COVID-19 pandemic, will improve soon.
"It's a momentous day for India's 130 crore people. It's also a momentous day for civil aviation. An airline that has been bleeding Rs 20 crore a day and Rs 7,500 crore a year over the last few years... this disinvestment process has been extremely thorough, extremely rigorous, and has resulted in a landmark outcome under the leadership of Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, DIPAM and the Ministry of Civil Aviation," Mr Scindia told NDTV.
Tata Sons will acquire Air India, 50 per cent of the catering business Air India-SATS, and Air India Express for Rs 18,000 crore, after it beat a Rs 15,100 crore offer by SpiceJet promoter Ajay Singh. Of this, the government will get Rs 2,700 crore in cash while Tata Sons will take the rest as debt. The transaction does not include non-core assets including land and buildings, which are to be transferred to the government's Air India Asset Holding Ltd or AIAHL.
"I wish the new owners all the very best and am very confident that under the new ownership they will continue to deliver a value proposition for customers and you will see a much more engaging environment in civil aviation in the days to come," Mr Scindia said.
"With a fleet of almost 175 planes now, you will certainly see a better value proposition for customers... My responsibility at the end of the day is to customers of civil aviation, whose interests will be served through this disinvestment," he said.
Air India and its affiliate companies had a combined debt of Rs 61,562 crore as of August 31. Of this, Tata Sons will take over Rs 15,300 crore debt - after paying Rs 2,700 crore in cash of the Rs 18,000 crore bid. The remaining Rs 46,262 crore debt will go to AIAHL.
On how this debt of over Rs 46,000 would be serviced, the Civil Aviation Minister said, "...The SPV (special purpose vehicle) houses many thousands of crores worth of non-core assets, which were not hived off with Air India. All the real estate, all other movables and valuable assets of Air India are housed under the SPV. Those will also be auctioned including immovable properties, which will help reduce the debt burden," Mr Scindia said.
On whether Tata Sons would be linked to this debt, Mr Scindia said the SPV has nothing to do with the disinvestment process. "Let me categorically state, Air India 100 per cent, Air India Express 100 per cent, catering arm AI-SATS 50 per cent. Those are the three transactions that have gone through disinvestment. All the debt has been moved from the balance sheet of Air India to the SPV and will remain with the SPV, not with the new owners," Mr Scindia said.
The Union Minister said he is talking to states to see if they can reduce value added tax on jet fuel so that price bands of ticket may fall.