The new owner of Air India (AI) may be allowed to trim the national carrier’s fleet size and also allow lay off of employees, said a media report. The government has received multiple bids for the disinvestment of its stake in the debt-ridden national carrier Air India (AI). However, the deal is likely to conclude in the next fiscal as the divestment process is unlikely to wind up in the current financial year.
According to the report in a business daily, the central government may allow the new owner to trim the national carrier’s fleet size by hiving off surplus aircraft lying grounded. Since air travel is still restricted due to the pandemic, the new owner may also be allowed to lay off employees as their requirement will shrink with the reduction in the fleet size, Business Standard reported citing officials familiar with the matter.
The Covid-19 pandemic has already forced airlines the world over to let go of some of their workforce as planes remained grounded amid lockdowns.
The official was quoted in the business daily saying, “Looking at the prevailing conditions acting as an overhang on the aviation sector, the new entity acquiring AI will be allowed to sell a few aircraft or return them to the lessor. They are anyway grounded due to lack of demand. With some aircraft sold, the manpower requirement, too, will drop. Proportionately, there can be some layoffs.”
The national carrier has 133 employees per aircraft. On the other hand, its subsidiary — Air India Express — has 55 employees per aircraft. In recent months, the ratio has improved as the carrier rolled out a leave without pay scheme, wherein employees will be sent on leave for up to five years, the report added.
While the new owner may be allowed to trim fleet size and sell assets, the government is likely to fix an upper limit up to which assets can be sold out. The Department of Investment and Public Management, the agency undertaking the sale process, said in a note that the new owner may be allowed to dispose of assets accruing from the 10-26 per cent of the net assets of the company.
Air India has a total fleet of 121 aircraft which includes 78 narrow-body Airbus A320s and 43 wide-body Boeing 777s and 787s. Sources told the publication that the 25-plus narrow-body aircraft and 15 wide-body aircraft have been lying idle since the outbreak of the novel coronavirus, which has killed demand. Currently, the airline is operating around 68 per cent of its pre-Covid capacity in the domestic sector.
Salt-to-steel conglomerate Tata Sons, US-based financial fund Interups, Inc., a consortium of Air India employees, along with a Delhi-based business house, have reportedly submitted expressions of interest to acquire 100 per cent stake in AI and its subsidiary Air India Express.
Air India has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The ailing national carrier has outstanding debt of Rs 23,286 crore after the government brought it down from Rs 62,000 crore earlier this year to make the airline more attractive to potential buyers.