New owners of Air India to get planes and $5 Billion of debt

Selling a majority stake in the loss-making, 85-year-old company isn’t going to be a cakewalk. At least one attempt almost two decades ago failed amid fierce political opposition.

India is selling a controlling stake in its flagship carrier along with two-thirds of the loss-making airline’s about $7.8 billion debt, as PM Narendra Modi moves ahead with the nation’s most high profile asset sale in decades.

The government will sell 76 percent of Air India Ltd., according to a document uploaded on the civil aviation ministry’s website on Wednesday. The airline’s overseas budget carrier will be completely sold in the offer, while the state will sell a 50 percent stake in the ground handling unit separately. The administration may also ask the buyer to conduct an initial public offering.

A successful sale of Air India, which is surviving on taxpayer-funded bailouts, is seen as test case for PM Modi to burnish his credentials as a reformist attempting to steer the state away from running businesses and boost spending on health and education. The national carrier has five subsidiaries, a joint venture and a combined workforce of as many as 27,000.

“Selling a 76 percent stake is the second-best option for the government; the best option would have been to exit completely,” said Kapil Kaul, South Asia CEO at CAPA Centre for Aviation, “There’s also a caveat there that the acquirer will have to list the company, which means the government is looking at exiting through an IPO route, which is fair enough and very positive.”

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