By Staff Correspondent
The Indian government has set its sights on raising INR 3,000 crore ($402 million) during the 2023-2024 fiscal year through the divestment of engineering and ground handling companies that were previously part of Air India Ltd. The move is part of a larger effort to sell off subsidiaries that were acquired as part of the airline’s privatisation drive. According to insiders familiar with the matter, the divestment process for AI Engineering Services Ltd and AI Airport Services Ltd is expected to take place in the coming financial year.
Those in the know claim that the government has already received positive feedback on the potential sale of the two firms, indicating strong interest among potential buyers. The Cabinet Committee on Economic Affairs approved the divestment process for Air India and its five subsidiaries in June 2017. The subsidiaries include regional carrier Alliance Air, Air India Engineering Services Ltd (AIESL), Air India Express, AI Airport Services (AIASL), and Hotel Corp. of India Ltd.
AI Engineering Services and AI Airport Services have proven to be the most lucrative among these firms. AI Engineering Services is the largest company in India’s maintenance, repair, and overhaul (MRO) sector, servicing approximately 450 aircraft in FY22. During that year, the company recorded a net profit of INR 844 crore ($113 million), including other comprehensive income. Meanwhile, AI Airport Services provides ground handling services at 105 airports in India and generated a net profit of INR 15.4 crore ($2.1 million) during FY22.
The Indian government has already sold 100% of Air India and Air India Express to the Tata Group as part of a deal worth approximately $2.4 billion. However, the government has yet to sell the remaining four companies. To consolidate these assets and other non-core assets, paintings, and artifacts, as well as other non-operational assets and liabilities, the government created a special purpose vehicle called Air India Assets Holding Ltd in February 2019, which was later renamed AI Asset Holdings Ltd after the divestment.
Insiders suggest that there are already three or four potential buyers for AIESL, with another seven or eight bidders expressing interest in AIASL’s ground handling arm. The successful bidder for AIASL is also expected to receive grandfather rights. The roadshows for both companies have already been completed. Officials stated that the government aims to raise INR 1,800-1,900 crore ($241-255 million) from the sale of AI Engineering Services and INR 700-800 crore ($94-107 million) from the ground handling arm of AI Airport Services.
Although the government plans to commence the divestment process for Alliance Air, it is not expected to take place until 2024 due to a lack of interest, given the ongoing consolidation and cost restructuring in Indian aviation. Nevertheless, insiders claim that Alliance Air is expected to generate interest due to its asset-light structure.
According to officials, the Tata Group is among the front-runners to acquire the engineering arm of Air India, which would create better synergies with the company’s narrow-body and wide-body fleet. Air India managing director and CEO Campbell Wilson recently stated that the absence of AI Engineering Services from the Air India divestment was a negative surprise and that they had to start building in-house capabilities from day one.
As part of the Air India divestment, the government took over the airline’s debt of around INR 45,000 crore ($6 billion) and all non-core assets, including around 111 properties, such as the office building and housing colonies, valued at approximately INR 14,718 crore ($1.97 billion), according to an official statement. The move is part of the Indian government’s efforts to improve its fiscal position and
