New Delhi: National passenger carrier Air India might shut-down, if its ongoing divestment programme fails due to the terms and conditions set in its 'Express of Interest' (EOI) document.
According to aviation consulting firm CAPA India, it is critical for the central government to amend the labour and debt conditions for the divestment process to succeed.
"Three key themes emerging on @airindiain divestment: 1) Critical that terms in EOI - particularly for labour & debt - are amended, as successful bidder will need to invest in restructuring and absorbing losses for several years, in addition to consideration paid for 76 per cent," the consulting firm tweeted on May 4.
"Three key themes emerging on @airindiain divestment: 2) Unless bidders confident that they will be ring-fenced from possible political risks if successful, this could prove to be a key reason for possible non-participation by some parties at RFP stage. #indianaviation 2 of 3." (sic)
Besides, the firm said that it estimates AI headed for "2-year losses of USD1.5-2.0 bn in FY19/FY20".
The development comes few days after the central government extended the submission deadline for the EOI bids under Air India's divestment process to May 31, 2018.
The 'Corrigendum' issued by the Ministry of Civil Aviation on May 1 extended the last date for EOI bid submission to May 31, 2018 from May 14.
Consequently, the date for the "intimation to the Qualified Interested Bidders" (QIB) has also been extended to June 15 from May 28.
In addition, the ministry issued a separate document on clarifications sought by interested bidders regarding the divestment process.
On the total debt and liabilities which are expected to remain with AI at the point of divestment, the ministry clarified: "... As on 31st March 2017, including net current liabilities of INR 88,160 mn, aggregating to INR 333,920 mn will remain with AI and AIXL (no change for AI-SATS except in normal course of business)."
"Essentially, the amount of Rs 3,33,920 mn includes both debt and liabilities including net current liabilities."
The clarification document outlined that net current liabilities as Rs 88,160 million (Rs 8,816 crore) and "these will remain with AI and AIXL as these have been incurred in the course of business."
"After deducting INR 88,160 mn from INR 333,920 mn, the remaining figure of INR 245,760 mn is the debt and liability quantum that will remain with AI and AIXL."
On March 28, the central government had issued a Preliminary Information Memorandum (PIM) inviting "EoI" for the strategic divestment of AI, along with the airline's shares in AIXL (Air India Express) and AISATS (Air India SATS Airport Services) from private entities including the airline's employees.
The central government owns 100 per cent equity of Air India. In turn, the airline holds full stake in Air India Express, while it holds 50 per cent stake in the joint venture AISATS.
Accordingly, it has been planned to divest 76 per cent government stake in AI, 100 per cent in AIXL and 50 per cent in AISATS.