After Air India, the government to sell Alliance Air as part of an asset divestiture program


Regional state-owned airline Alliance Air will be sold as part of the government’s asset divestiture program.

“Alliance Air, which is part of Air India Asset Holdings Pvt Ltd (AIAHL), will also be monetized and the profits will be used to pay off debt,” said a senior government official.

Alliance Air was a wholly owned regional subsidiary of Air India, which was separated from the national carrier after the government decided to divest its stake.

The Tata group has won the Air India takeover bid, the government said on Friday.

The agreement includes a 100% stake in Air India and the low cost unit Air India Express as well as a 50% stake in ground handling company AISATS.

Agencies

EY was the exclusive transaction advisor for the sale of Air India. Alliance will not be part of this acquisition.

Air India’s total debt, up to August 31, was 61,562 crore. The Tata Group will get the airline in debt of 15,300 crore. The remaining debt of 46,262 crore will be transferred to AIAHL, a special purpose vehicle that houses the assets and liabilities of the national carrier. The assets include offices, including the Air India building in Mumbai, and the transportation and engineering subsidiaries as well as Alliance Air.

Likely suitors

“While the sale of buildings and other assets is expected to net around 14,700 crore, the monetization of ground support, engineering subsidiaries and Alliance Air is expected to net over ₹ 2,000 crore,” said another manager aware of the development.

Alliance Air operates a fleet of 19 ATR aircraft which connect 48 destinations and achieved operating profit of 65.09 crore in fiscal year 20 and a net loss of ₹ 201 crore during the period. “The likely suitors for this airline would be regional carriers, many of which emerged after the government’s regional connectivity program,” the official said.

Among the two other subsidiaries, the ground handling unit is profitable while the engineering subsidiary is a loss-making company.

The government recently prompted Alliance Air to launch international flights to Sri Lanka, the first time it has gone overseas. Alliance Air operates various unprofitable routes in the Northeast which are subsidized by various government incentives. It is not clear whether these incentives will continue after the sale of the airline.


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