What if the interest rates are slashed?
If Air India’s SPV move happens to be successful, AIAHL will rid itself of an interest burden of nearly Rs 300-400 crore per year. It would recast Rs 15,000 crore of the expensive debt. However, as of now, it is unclear if a reduction in interest rates would be approved as lenders, including the State Bank of India (SBI), are not obligated to cut rates.
A final call on the matter hinges upon the decision taken by the banks’ management and the central government.
The history of the SPV
The government incorporated the Air India’s SPV in January 2018 after it approved the transfer of Air India’s accumulated working capital loan over to AIAHL on February 28, without the backing of any asset. This was done to attract buyers for the airline. The national carrier’s non-core assets like artefacts and paintings were also kept with the AIAHL which the PSU is expected to monetise. Air India’s total debt stands at Rs 55,308 crore.