Trouble looms for AI subsidiary divestment

The Airports Authority of India’s (AAI) tender inviting bids for ground handling services for 76 of its airports may impact the disinvestment of Air India (AI) ground handling arm AIATSL, say potential bidders. Within hours of the government inviting interest for 98% stake sale of Air India Air Transport Services Limited (AIATSL) on Tuesday, the Bird Group wrote to the transaction adviser Ernst & Young (EY), enquiring if the high royalties to the AAI, quoted by some entities which are likely to be awarded contracts for the 76 airports, would have to be matched by AIATSL’s new owner, according to its spokesperson. “If the response to our query is yes, then AIATSL becomes unviable,” the Bird Group spokesperson added. AIATSL offers services to a total of 46 airlines at almost all of these 76 AAI airports. According to sources, some bidders, likely to be awarded ground handling contracts, had quoted royalties of 15%-227% to the AAI. According to AAI’s new regulations on ground handling, “at all airports, the joint venture or the subsidiary of Air India shall match the lowest royalty paid by the other ground handling agencies.”

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