Alliance Air: Government Plans Rs 300 Crore Equity Infusion

According to a reliable insider, there are reports indicating that the Ministry of Finance is gearing up to inject a substantial amount of Rs 300 crore as equity investment into Alliance Air, a regional airline.

Alliance Air, previously affiliated with Air India, is currently owned by AI Assets Holding Ltd (AIAHL), a special-purpose entity created by the government. This financial move by the government has the potential to alleviate the existing financial challenges faced by the airline corporation. Alliance Air, an airline currently grappling with financial challenges, is poised to benefit from a well-timed injection of funds from India’s Ministry of Finance, as previously disclosed. 

The capital infusion of $36.5 million is expected to alleviate a portion of the airline’s financial burdens, including an ongoing dispute with pilots that have intermittently disrupted operations to a significant extent, according to an official from the Ministry of Civil Aviation. While no further details were provided, the official confirmed this development to PTI.

Alliance Air, which operates approximately 130 flights daily, is currently on track for disinvestment. Over the past few months, pilots have actively organized protest strikes, primarily due to their dissatisfaction with the failure to restore salaries to pre-Covid levels and the non-payment of allowances.

According to a high-ranking representative from the civil aviation ministry, who communicated with PTI, it has been disclosed that the finance ministry has granted its approval for a significant infusion of Rs 300 crores in equity investment into Alliance Air. Nevertheless, it may require a certain duration before further precise information concerning this investment is made accessible.

According to an official from the Ministry of Civil Aviation, the Ministry of Finance is proposing a significant equity investment of 300 crore rupees into Alliance Air. The specific details of this investment have not been disclosed at this time. Alliance Air, now known as Alliance Air Aviation Ltd., has been facing financial challenges, as evidenced by its net loss of 447.76 crore rupees during the fiscal year 2021-2022.

This airline is responsible for managing flights under the brand name “Alliance Air.” As per the latest information available from the corporate affairs ministry, the company has an authorized capital of 2,000 crore rupees and a paid-up capital of 402.25 crore rupees. In addition to the net loss, Alliance Air also experienced a cash loss of 224.18 crore rupees during the fiscal year that concluded in March 2022.

The airline’s present circumstances are unlikely to instil confidence in prospective purchasers, thereby leading to a highly probable decrease in the proposed selling price. The Indian government is actively seeking a purchaser for the airline. Despite India’s intention to recover a portion of the funds invested in Air India before its privatization, there has been minimal advancement in the privatization of Alliance Air since its preparations for a sale commenced last summer.

During the initial months of 2022, Tata Group made a significant acquisition by purchasing Air India, excluding Alliance Air. Subsequently, in April of the same year, the subsidiary officially disassociated itself from Air India. Alongside the sale of Alliance Air to private buyers, the Indian government is actively seeking to regain the worth of AIAHL assets, namely Air India Air Transport Services and Air India Engineering Services.

According to information gathered by Planespotters.net, Alliance Air possesses a fleet of 20 ATR turboprop aircraft, with an average age of under seven years. This fleet consists of two ATR 42s and 18 ATR 72s. Although there have been talks about expanding Alliance Air’s international operations and potentially offering flights to Bangladesh, Nepal, and Myanmar, no concrete steps in that direction have been implemented thus far. Presently, the airline operates an extensive domestic network, with over 130 daily flights serving more than 70 cities across India.

The AIAHL (Air India Asset Holding Limited) currently manages four entities that were previously under the umbrella of Air India. These entities consist of Hotel Corporation of India Ltd., Airline Allied Services Ltd., Air India Engineering Services Ltd., and Air India Air Transport Services Ltd. As part of its long-term plans, the administration intends to recommend the divestment of all four enterprises. It is anticipated that a request for expressions of interest (EoI) will be announced in the near future, specifically for Air India Engineering Services and Air India Air Transport Services. In January 2022, the Tata Group successfully acquired Air India and Air India Express, both of which were facing financial losses.

Proofread, Edited & Published by Naveenika Chauhan