The divestment plan of national carrier Air India is likely to be a tricky affair. The first signals which came on Tuesday are not encouraging. No bidders came forward to participate in the auction for its properties at prime location in Mumbai, Bengaluru and Trivandrum.
“No bidders turned up for the proposed sale of properties in the form of land parcels and built-up flats in Mumbai, Bengaluru and Trivandrum through e-auction. The poor market is seen as the reason for this,” said an Air India official. The airliner wanted to raise around Rs80 crore through sale of its seven properties under asset monetisation plan.
As per the turnaround plan/financial restructuring plan approved by the Cabinet Committee on Economic Affairs (CCEA) in 2012, the national carrier is required to monetise its assets and generate Rs5,000 crore by way of sale, leasing or developing an asset as a joint venture. Under the plan, the carrier is to get financial assistance to the tune of Rs30,000 crore over a 10-year period.
Air India has been in possession of some properties which are lying vacant and unused for long. These include parcels of land as well as residential and commercial estate in India and abroad. The national carrier is also in the process of leasing out around 25,500 square feet space at its Kolkata office complex.
While Finance Ministry and NITI Aayog have favoured privatisation of Air India, the Ministry of Civil Aviation (MOCA) is in favour of reviving the airline burdened with a debt of more than Rs52,000 crore. Sources said that since three of the five AI subsidiaries — Air India Transport Services, Air India Express, and Air India Engineering Services limited (AIESl) — are already making good profits for the last two fiscal, the MOCA is not keen on majority stake sale. The AI has five subsidiaries — Air India Express, Alliance Air, AITS and Air India Engineering Services limited (AIESl), and AISATS.
The Cabinet will take a call on the fate of the AI after various issues, including the concerns raised by the Civil Aviation Ministry, are resolved. While the matter relating to Air India is now with the PMO, a senior MOCA official hoped that Prime Minister Narendra Modi, who is credited to be as “turnaround man for State PSUs (Gujarat),” will not allow the “sell AI lobby” to implement its agenda.
Earlier in the day, Minister of State for Civil Aviation Jayant Sinha said inter-ministerial consultations on the future course of action for Air India have been completed, and the Cabinet would decide on how best to move forward.
“The Government needs to understand that Air India is an international airliner, which plays important role in situation where evacuation of our citizens is required as was done in case of Syria and Yemen. But once the AI is privatised, the managing logistics in such exigency would not be easy,” explained a MOCA official.
The Government’s regional connectivity plan could also be affected in case of privatisation of the AI since the Alliance Air and Air India Express are major players in the Udaan scheme. led by Chief Executive Officer (CEO) K Shyam Sunder, Air India Express, the low cost arm of Air India, earned a net profit of Rs415 crore last fiscal and the airline’s operating revenue increased by 18 per cent.
The airline has achieved operating revenue of Rs1,897 crore against Rs1,609 crore earned in the first half of financial year 15-16. With a total fleet size of 23, it recently started new operations like New Delhi-Dubai, New Delhi-Abu Dhabi, Mumbai-Dubai, Mumbai-Sharjah, Chandigarh-Sharjah, Tiruchirappalli- Sharjah, and Kochi-Dammam.
Another profitable subsidiary with the largest number of Air India’s manpower, AITS, also known as Air India Transport Services limited (AIATSl), was conceptualised in 2013 where the Centre promised a budgetary support out of which the organisation is yet to receive half of the Rs300 crore amount approved.
But for the last two financial years, AIATSl, serving ground works for Air India and customers at 69 airports, have been making profits of over Rs100 crore.
With a manpower of over 12,000 staff led by CEO Ashwini Kumar Sharma, the AITS is now keen on extending its services even to foreign airports. Sharma is credited to have developed the separate Haj Terminal at IGI airport during the tenure of Sharad Yadav at the MOCA.
Besides servicing Air India, the profit-making AIATSl also provides ground services to other carriers including Emirates, Singapore Airlines, Thai Airways, China Eastern at Indian Airports.
The other subsidiary — Air India Engineering Services limited (AIESl) led by CEO HR Jaganathan have been successful in bringing several airliners including the Indian Air Force (IAF) under its MRO’s (Maintenance, Repair Overhaul) stations to service their flights. In a major feat, both for the Air India as well AIESl, last month it started MRO operations at Sharjah.
“Two different views have emerged within the Government with respect to stake sale in the airline. One view is that the Government should offload majority stake in the airline and retain the minority stake as well as the Air India logo which could be done after taking over a portion of its debt. Another idea being floated is for minority stake sale by the Government and then work on ways to address the debt woes, including by way of selling the airline’s assets,” said a MOCA official.