The SPV would service the debt transferred to it by raising extra-budgetary resources (EBRs) as well as monetising non-core assets of AI, without putting any immediate burden on the exchequer, an official told FE.

Starting FY20, the national carrier is unlikely to receive any budgetary support from the Centre, the official said. Such a move would leave AI to fend for itself, including servicing of the residual debt of Rs 18,447 crore, by improving operational efficiency and cutting wage costs.

AI’s interest cost stood at Rs 4,235 crore in FY17 while it reported a loss of Rs 5,765 crore. The airline’s losses may shoot up in FY19 as aviation fuel costs have gone up by 35% year-on-year in the past one year.

With cash crunch likely to continue due to rising fuel costs, the Centre will infuse an additional Rs 2,056 crore in the current financial year to help AI service loans and pay salary.

The additional budget support means the government’s Rs 30,231-crore equity infusion under a 10-year turnaround and financial restructuring plan will come to an end two years ahead of its schedule in FY21. AI has received an equity infusion of Rs 28,175 crore till date, including Rs 1,630 crore so far this year.

“Two-three years time will be given under the new TAP to AI to turn around before it is divested,” another official said. A ministerial panel, headed by finance minister Arun Jaitley, is working out the details of the AI package, which will be announced in less than two weeks.

Except AI, AI Express and Air India Singapore Airport Terminal Services, which will be sold together later, the carrier’s other assets such as wholly-owned subsidiaries AIESL (which is involved in the maintenance, repair and overhaul of engines and airframe), AIATSL (a ground handling and cargo handling services firm), HCI (which operates two hotels in Delhi and Srinagar as well as the Chef air kitchen units in Delhi and Mumbai) and AASL (which provides connectivity to Tier II and Tier III cities) will be transferred to the SPV. It will also house AI headquarters in New Delhi, housing complex in Santa Cruz apart from other land and buildings owned, leased, licensed or possessed by AI and various articles of arts and artefacts.

The board of the SPV will consist of representatives from the department of investment and public asset management and economic affairs, among others.

In June this year, the government called off the proposed sale of a 76% stake in AI after no buyer showed interest. The TAP would include improving operational ratios such as increasing flight occupancy, rationalising loss-making routes and manpower costs. Nearly 4,200 of AI’s 11,200 permanent staff is due to retire in the next five years.