Disinvestment-Bound Air India Turns A Corner, Reduces Losses By 40%Air India planes prepare for take-off at the Indira Gandhi International Airport in New Delhi. (MANANVATSYAYANA/AFP/GettyImages)

Airindia has reduced its operational losses between April and December by over 40%, Livemint reported.

The improvement is likely to augur well for Union government's proposed divestment plan for the state-owned airline. The expression of interest (EoI) and the share purchase agreement (SPA) detailing the terms and conditions for its sale set to be unveiled in the next two or three days.

The airline's net loss narrowed by 46 percent year-over-year, while the yield rose by 6.7 percent, CNBC-TV18 reported Passenger revenue grew a healthy 14.7 percent Y-o-Y to around Rs 17,320 crore with passenger carrying capacity or ASK (Available Seat Kilometers) rising by 4.9 percent.

The marked improvement was also outcome of a lower interest burden faced by the airliner after half of Air India’s debt was transferred to a Special Purpose Vehicle (SPV), as well as better operational performance.

A special purpose vehicle(SPV) -Air India Assets Holding -was formed by the government to acquire the non-core assets of Air India and its subsidiaries . The SPV has mopped up a total of Rs 21,985 crore by way of bond issues since September 16.

“The airline earlier spent close to ₹4,000-4,500 crore a year for servicing its debt. This figure has now come down to ₹1,400-1,500 crore after a large chunk of the airline’s debt was moved into an SPV last year," Livemint quoted an official as saying.

Another reason attributed to the improvement in 9-month earnings was due to recovery of several wide-body aircraft which were grounded earlier for want of maintenance, As of March 2017, Air India had a total operating fleet of 104 aircraft, out of which 61 were narrow-body and 43 were wide-body.

According to latest data released by the Directorate General of Civil Aviation, Air India had 12.7% share of the domestic marketcarried 18.36 million domestic passengers in 2019. The national carrier had ferried 17.61 million passengers in 2018.

A group of minister formed to overview the divestment process of Air India has approved the draft expression of interest, share purchase agreement and preliminary information memorandum to sell 100 percent stake in Air India on January 7.

It is likely that bidder willing to take on the biggest chunk of debt, currently estimated at Rs 74,000 crore (which includes both long-term debt and dues payable to suppliers), wins. Right now it is not clear how much debt will be left on Air India books at the time of the sale, though some of it has already been transferred to a special purpose vehicle.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber