Monday, July 10, 2017

Almost all Air India subsidiaries likely to post profit this fiscal year

Mumbai: All but one of Air India’s key subsidiaries will likely make net profits this financial year, said two senior executives in the airline, making it more remunerative for the government to sell stakes in these units than to entirely divest its ownership from the flagship carrier.

Air India Express, the regional short-haul service of the airline, may post a net profit of about Rs 300 crore in the year to March 31, 2018: The ground handling unit and halfowned catering service AISATS would together post a net profit of over Rs 200 crore. Separately, the domestic regional arm Alliance Air will also turn in net profits this year, according to the executives.

According to some informal calculations made internally, the combined valuation of Air India Express and the ground handling unit would be about Rs 12,000 crore, said one of the executives cited above SpiceJet, a low-cost carrier that is on a revival course, has a market capitalisation of about Rs 7,500 crore, while Jet Airways is valued at about Rs 6,700 crore.

The sole money loser among Air India’s subsidiaries is the engineering services business. “Air India Engineering services would have sales of Rs 600 crore from Air India and only Rs 150 crore from third-party contracts. If the latter chunk reaches Rs 400 crore, it will break even,” said one of the executives cited above.

The engineering services division carries out aircraft checks, including the advanced C checks, for Jet Airways and will soon do the same for SpiceJet from August, said the executive. It has applied for approval from the European Aviation Safety Agency for some crucial approvals, which could open doors for trebling of its revenue. But breakeven will take at least two years and profits even longer, the executive said.
10/07/17 Anirban Chowdhury/Economic Times