Thursday 21 October 2021
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HomeEconomyBusinessAlliance Air next to be privatised

Alliance Air next to be privatised

Alliance Air was a fully-owned regional subsidiary of Air India, which was carved out from the national carrier after the government decided to divest stake in it

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State-owned carrier Alliance Air will be sold as part of the government’s asset-disposal programme.

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

Alliance Air was a fully-owned subsidiary of Air India, which was carved out from the national carrier after the government decided to divest stake in it.

The Tata Group won the bid to take over Air India, the government announced on 8 October. The deal includes a 100% stake in Air India and low-fare unit Air India Express as well as 50% stake in ground-handling firm AISATS.

EY was the exclusive transaction advisor for the Air India sale. Alliance won’t be part of this acquisition.

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

“While the sale of building and other assets is set to fetch about Rs 14,700 crore, monetising the ground-handling, engineering subsidiaries and Alliance Air is expected to fetch over Rs 2,000 crore more,” said another official aware of the development.

Alliance Air operates a fleet of 19 ATR planes that connect 48 destinations and made an operating profit of Rs 65.09 crore in FY20 and a net loss of Rs 201 crore during the period. “Likely suitors for this airline would be carriers, many of them have come up after the government’s regional connectivity scheme,” said the official.

Among the other two subsidiaries, the ground-handling unit makes profits 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 was going overseas. Alliance Air operates various non-profitable routes in the Northeast that are subsidised through various incentives by the government. It’s not clear whether these incentives will continue after the sale of the airline.

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