Government keeps four units out of Air India divestment

639d1bd05b86be4e116f37e4e90b8334The four units, which include Alliance Air, ground handling and MRO subsidiaries, are expected to be hived off and possibly sold by December

Moneycontrol News

The government has excluded four of Air India’s subsidiaries from the divestment, details of which were released on Wednesday.

The four units are –

AIESL: A wholly owned subsidiary of AI, primarily involved in the maintenance, repair and overhaul of engines and airframe

AIATSL: A wholly owned subsidiary of AI, primarily involved in ground handling and cargo handling services

HCI: A subsidiary of AI which owns and operates two hotels in Delhi and Srinagar as well as the Chef air kitchen units in Delhi and Mumbai

AASL: Operates Alliance Air, which provides connectivity to Tier II and Tier III cities in India and also links these cities to metro hubs

The preliminary information memorandum notes that the four units “will not be part of the Proposed Transaction.”

The government plans to hive off these units through a demerger, or “other appropriate mechanisms”, said the memorandum.

Those in the know say that the government has already received interests for AIESL from players like  Air Works, among the oldest MRO service providers in the Indian market. International players such as Hong Kong Aircraft Engineering Company and Etihad Airways Engineering could also join the race.

AASL, which runs Alliance Air, is also expected to evoke interest, given its network in the shorter-route destinations in India. The airline flies to four destinations and has a fleet of 15 aircraft. Domestic airlines such as IndiGo and SpiceJet have recently launched services in smaller cities as part of the regional connectivity scheme, known as UDAN. Even new entrants like Air Odisha could be in the reckoning.

The government is expected to come out with more details on the sale of these units in the coming weeks. “The plan is to complete the demerger of these units by December, by when the divestment of Air India is aimed to be concluded,” said an executive from the industry.

Tough deadline

But that deadline may be a tough one to keep.

Following is the proposed timeline of the divestment.

Kapil Kaul, CEO & Director of CAPA South Asia, said, “Meeting end-December divestment deadline may be challenging,” in a note on Wednesday on the divestment announcement.

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