Govt gives approval to sell 100% stake in Air India's ground handling firm

Proceeds from the sale would be used to pay off Air India's debt

The government on Tuesday appro­ved 100 per cent stake sale in state-owned airline Air India’s ground-handling company Air India Air Transport Services Limited (AIATSL).

The approval comes at a time when the government is working on ways to revive the fortunes of Air India — estimated to have debt burden of more than Rs 500 billion, including sale of non-core assets. 

Proceeds from the sale of AIATSL would be used to pay off part of Air India’s debt. “Strategic sale of 100 per cent share sale in AIATSL has been approved,” Civil Aviation Secretary Rajiv Nayan Choubey said.

After a failed attempt to sell Air India, the government has embarked on a plan that includes transfer of Air India’s portion of debt to a holding company. According to the plan, Air India’s subsidiaries will be sold. 

AIATSL is Air India’s only profitable subsidiary. In 2016-17, it clocked a profit of over Rs 334 million, earning Rs 6.2 billion in revenues from its handling operations. 

Both its revenues and profits dipped as compared with the last year, but the carrier hasn’t run a loss since its operations as a separate subsidiary of Air India in 2013.

AIATSL’s present scope of business includes contracts from Air India and other government organisations such as the Agriculture & Processed Food Export Development Authority (Apeda). According to its latest annual report, it signed contracts with Air India and its associated companies, which would have fetched it Rs 4 billion in 2017-18. It earned Rs 860 million from Apeda, handling its agricultural produce in 2016-17. Over the last couple of years, AIATSL has also increased revenues from third parties in its core business of handling. It earned Rs 2.9 billion from its core handling business from its parent company.

While the policy was formulated when the contours of Air India disinvestment were not known, it is unclear how the government would extend this exclusivity to potential buyers to make the deal more irresistible without risking legal consequences posed by other private players in the ground handling business. Even without such saccharine-laced clauses to induce potential buyers, AIATSL’s future looks promising for those looking to get their hands on it. 

According to International Civil Aviation Organisation (ICAO), there were 946,379 domestic and international departures from all Indian airports in 2016-17, a growth of 45 per cent since 2012-13. Even more impressive was the buoyancy in the number of passengers, which touched 125 million – up 74 per cent the same period.

Aviation consultancy firm CAPA estimates that almost 500 new aircraft will be delivered to India’s airline operators over the next five years, which makes it “the greatest volume of aircraft induction in the history of Indian commercial aviation.” 

More passengers mean more aircraft, which, in turn, means more departures, and eventually translates into high demand for professional ground-handling services at all Indian airports. It’s not just passenger traffic, but also cargo handling that has boomed in India. Over 931,000 tonnes of cargo were handled at Indian airports in 2016-17, a growth of 55 per cent from 2012-13. Unlike Air India, AIATSL doesn’t have any debts in its books. If anything, it has to receive Rs 3.6 billion from the national airline and its group companies.