A clearer picture of Air India’s finances, which its new owner will have to bear, will emerge in the Request for Proposal (RFP). The Centre will make the RFP available only to those parties which are short-listed for putting in a financial bid for the state-owned airline.

While the Preliminary Information Memorandum (PIM) released by the government can be purchased after depositing ₹10 lakh, the RFP will be made available to the short-listed bidders based on guidelines which have not been made public yet .

“The RFP will have the airline’s financial details up till the end of December this financial year while the PIM has details till the end of March. The schedule is being updated as many aircraft have been/will be acquired during this period,” a person associated with the divestment process explained.

The RFP will have details on expenditure on capital assets like payment of lease charges for 14 A320 Neos acquired by Air India for 12 years by its management led by the government. Besides, the airline also acquired six Boeing 787 and one 777 in February this year and details of these will also show in the RFP.

Debt refinance

The new owner will also have to refinance whatever debt is guaranteed by the government including a bridge loan for about ₹6,000 crore. The need to refinance government loans arises because post the divestment process being completed, the daily management of Air India will pass into the hands of the private sector and hence the government cannot stand guarantee for the loans.

Normally a government guaranteed loan ensures that the rates of interest are lower, as it is guaranteed by the state.

The new owner, not being bound by strict government guidelines on finances, should be able to work out much better refinance terms and conditions for these assets, analysts feel. For example, currently Air India is likely to pay a lease rental of over $1.4 billion for leasing the 12 A320 Neo aircraft. A private party could have negotiated and purchased more Neos at this price.