Economy

Govt allows market to decide debt level of Air India

Our Bureau. New Delhi | Updated on October 29, 2020 Published on October 29, 2020

Domestic fare cap extended for another three months

The government has decided not to predetermine Air India’s debt level and leave it to the market to decide even as the last date for submission of Expression of Interest by interested parties has been extended to December 14. The earlier deadline for submission of EOIs was October 30.

The government plans to sell 100 per cent of its equity share capital in the state-owned airline, including Air India’s shareholding interest of 100 per cent in AI Express Limited and 50 per cent in Air India SATS Airport Services Private Limited.

 

Briefing newspersons after the latest corrigendum was made public, Tuhin Pandey, Secretary, DIPAM, said this did not mean that AI was becoming debt-free.

‘Environment uncertain’

“We are doing this because it is an uncertain environment. The debt level which was pre-fixed has now been unshackled, and therefore, Enterprise Value (EV) bidding can take place. This construct opens up a range of bidders while it also brings in skin in the game,” he said.

Besides, whatever EV a bidder quotes, it will have to provide a minimum 15 per cent of that in cash to the government.

“Fifteen per cent is the minimum cash consideration, but that does not mean that the bidders cannot quote higher cash than that. They can even take 100 per cent. If they offer more than 15 per cent, it will lead to less debt but it will not get any preference for bid evaluation. For bid evaluation, the higher the EV, the better the bid and the highest EV gets it,” Pandey said.

Meanwhile, domestic airfares will remain capped at the upper and lower levels for another three months or February 24, Hardeep Puri, Minister of State for Civil Aviation said.

“We have progressed… but I think we need a little more cushion,” he said adding that if the situation came back to the pre-Covidlevels earlier, the government could remove the cap.

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Published on October 29, 2020
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