Preliminary Information Memorandum (PIM) For Strategic Disinvestment of Air India issued

Jan 27,2020

Shri Hardeep S. Puri, Minister of State(I/C), Ministry of Civil Aviation in a Press Conference today informed that the newly constituted Air India Specific Alternative Mechanism (AISAM), headed by Hon’ble Home Minister and comprising of Union Ministers of Commerce & Industry, Finance & Corporate Affairs and Civil Aviation, as members, has approved the release of the Preliminary Information Memorandum (PIM) for inviting Expression of Interest (EOI) from the Interested Bidders (IBs) for Strategic Disinvestment of Air India.  He informed that the Government has released the PIM for seeking EOI for strategic disinvestment of Air India.

Addressing the Media, Shri Puri informed that Air India along with Air India Express has 146 aircraft in its fleet, 82 of which are owned by it; have worldwide bilateral rights and spread over domestic as well as international slots and added that   During 2018-19, both Air India and Air India Express carried around 26.2 million passengers.  Air India and Air India Express have average aircraft age of 8 years which is among the youngest fleet.   27 Boeing-787 with Air India are as young as 5 years and 27 Airbus-320 Neo (CFM engines) are as young as 2 years.  Air India and Air India Express have almost 51% share of the international traffic to/from India among Indian carriers and 18 % share including global carriers (ex-India).

Pointing out that Air India has coverage of 98 destinations with 56 domestic and 42 international destinations, Shri Puri informed that Air India offers 75 additional destinations through its secondary network of code share operations.  Air India and Air India Express have a combined revenue of Rs.30,632 crore in 2018-19, which is the highest among Indian carriers.  Air India + Air India Express employee cost as % of revenue is about 11% which is comparable to Indian carriers and much lower to International carriers.  AISATS provides in-house ground handling facilities at key metro airports – Delhi, Bengaluru, Hyderabad, Thiruvananthapuram and Mangalore.  Even after infusion of about Rs.30,500 crore as per Turn Around Plan since 2012, Air India has been running into losses year after year.  Due to its accumulated debt of about Rs.60,000 crore, its financial position is in a very fragile condition.

A few of the key decisive parameters in the current PIM include:

Transfer of management control and sale of 100% shares of Air India along with Air India’s 100% stake in its subsidiary, Air India Express Limited and 50% stake in joint venture, AISATS.
Freezing of Debt in Air India at Rs.23,286.5 crore which is approximately equivalent to the Written Down Value (WDV) of combined assets of Air India and Air India Express.
The liabilities to be retained in Air India will be equal to certain current and non-current assets. Considering the combined figures as on March 31, 2019 the liabilities retained would be Rs 8771.5 crore.
The remaining debt and liabilities of Air India and Air India Express will be allocated to SPV (Air India Assets Holding Limited).
The contingent liabilities related to statutory dues and Government dues will be indemnified by Government.
The contingent liabilities due to retired employees will be clarified at the RFP stage.
Corporate guarantees given by Air India on behalf of Alliance Air will not be passed to new investor.
Land and buildings at Delhi, Mumbai airports and Corporate Office which are core assets for running the airline will be given to new investor on right to use basis for a limited period.
Government has committed to pay certain employees’ related dues before closing of transaction.
The bidding structure on forming the Consortium has been eased as compared to last round of bidding.
The financial capability of prospective investors has also been made more attractive such as lowering of Net Worth criteria to Rs. 3,500 crore, and Net Worth qualification of investor based on strength of its Affiliate.
Individual member must have at least 10% share in the consortium i.e. a net worth or ACI of Rs.350 crore. The scheduled Indian commercial operator(s), however, with zero or a negative net worth are eligible to be a member of the consortium provided they have shareholding of <=51%.
The Air India with new investor will continue using the ‘Air India’ brand.
 

Employees related issues

The total employee strength of the two companies is 17,984, out of which 9617 are permanent employees. Approx 36% of the permanent employee will be retiring in next 5 years.

AISATS has 11958 contractual employees and 399 employees are deployed from Air India and other subsidiary.

Employees’ dues of about Rs.1383.70 crore on account of Justice Dharmadhikari Commission’s recommendation on past arrears will be paid by the Air India Assets Holding Limited (AIAHL) – the SPV before closing of the proposed transaction.

Provision for Rs.207.63 crore towards wage arrears accruable to employees working on Narrow Body fleet has been made in the books of account of Air India. The treatment of this liability may be provided at RFP stage.

3% of equity shares of Air India to be offered to the permanent employees of Air India as ESOP.