New Delhi, January 31, 2017

The Survey has come down heavily on the government’s attempts to prop up Air India.

“Defying history, there is still the commitment to make the perennially unprofitable public sector airline world class,” the Survey says.

The Manmohan Singh government had committed ₹40,000 crore to Air India, which helped the airline report an operating profit of ₹105 crore for 2015-16 against a loss of ₹2,636 crore in the previous year.

Air India is now looking at a consortium of 19 public sector banks to convert its loans worth ₹10,000 crore into equity. If the proposal goes through, as much of 40 per cent of Air India’s equity will be held by the consortium. The revamp comes as the Reserve Bank of India has come out with S4A guidelines which look at ways and means of providing sustainable restructuring for financially stressed companies.

Conversion of debt

The new guidelines allow conversion of outstanding debt into sustainable and non-sustainable debt, with the latter being converted into equity. The RBI allows this if a majority of the lenders, who hold nearly 75 per cent of the value of the debt, get approval from their respective boards. State Bank of India, Bank of India, Bank of Baroda, Punjab National Bank, Central Bank of India, Oriental Bank of India and Canara Bank are among the banks that are part of the consortium which is examining the proposal.

It also points to the steps taken for airport privatisation that have taken the form of awarding management contracts rather than change in ownership. Tenders for handing over airport terminal management at Jaipur and Ahmedabad are already out and the winner will be the party which quotes the lowest cost for managing the airports as well as the highest revenue increase. While the city side land at these two airports will not be given, the car parking areas at Jaipur and Ahmedabad will be part of the contract. The contract for airport terminal management will be for 10 years.

[The Hindu Business Line]