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Government OKs transfer of Air India debt, subsidiaries

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Air India A320neo Rob Finlayson

The Indian government has approved the transfer of some of Air India’s debt and subsidiaries to a separate entity—an important step in the government’s latest effort to find a buyer for the airline.

India’s cabinet, chaired by Prime Minister Narendra Modi, agreed to the establishment of a special purpose vehicle (SPV) called Air India Assets Holding Ltd. (AIAHL). The SPV will be used to “warehouse” INR294.6 billion ($4.1 billion) of the airline’s debt, according to a government statement.

The move is aimed at making Air India more appealing to potential investors. The government attempted to find a buyer for a 76% stake in the airline last year but was unsuccessful, with the carrier’s debt believed to be one of the main sticking points. The government is expected to make a fresh attempt to divest Air India later this year.

In addition to the debt, several subsidiaries being held back from the main Air India sale process will also be transferred to the SPV. These include Air India Air Transport Services Ltd. (AIATSL), Airline Allied Services Ltd., Air India Engineering Services Ltd. and the Hotel Corp. of India Ltd. Some of the airline’s subsidiaries will be sold separately.

So far one of the subsidiaries, ground handling unit AIATSL, has been transferred to the SPV. The Indian government intends to sell 98% of AIATSL, with the remaining 2% offered to employees.

Source: ATW

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