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Air India to turn financially attractive before divestment
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SME Times News Bureau | 18 Mar, 2019
More investments with strict riders have been planned to make Air India
financially attractive before starting any new round of divestment,
Union Minister Suresh Prabhu has said.
As per the plan, Air India
would be allowed to induct more aircraft to grow its market share,
while a search-cum-selection committee will scout for the best
management talent for the company.
The airline group with a
consolidated debt level of around Rs 55,000 crore will also be required
to sell non-core assets, and adhere to a Rs 2,000 crore cost saving
plan.
According to the minister, the financially challenged
airline will induct three aircraft on a dry-lease within the next two
months.
"Air India placed order for induction of 27 A320 NEO on
dry lease basis. Out of 27, 24 have already been inducted and remaining 3
will be inducted within next two months," the minister told IANS.
In
2018, the company failed to find any suitors during the last and the
only attempt by the government to divest its stake in the airline
business.
"Government has prepared a 'Revival Plan' of Air
India... which includes a comprehensive financial package, transferring
non-core debt and assets to an SPV (special purpose vehicle)," Prabhu
told IANS.
"We have also proposed to induct eminent persons on the board of Air India through ‘Search-cum-Selection Committee' process."
Last
month, the Union Cabinet approved creation of an SPV -- Air India
Assets Holding Ltd -- for transferring the accumulated working capital
loans of the national carrier.
It has also approved the associated activities for the disinvestment of Air India and its subsidiaries or joint ventures.
Accordingly,
Rs 29,000 crore debt of Air India along with four of its subsidiaries
will be transferred to the SPV. Non-core assets like paintings and
artefacts and other non-operational assets will also be transferred to
the SPV.
The move assumes significance as it will lessen the interest payment obligation of the airline.
The
Centre has also invited "Expression of Interest" for strategic
divestment of the carrier's ground handling subsidiary Air India Air
Transport Services Ltd (AIATSL) which has been transfeered to the SPV.
The disinvestment proceeds from the sale will be used to pay off the debt incurred by the SPV.
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