Tuesday, July 04, 2017

Why debt-ridden, loss-making Air India is still an attractive buy for some

New Delhi: After the Union Cabinet allowed the divestment of loss-making Air India, several companies such as Tata Group, Indigo and Qatar Airlines have shown interest. But heavy losses and debt remain big concerns of a prospective buyer.

However, despite its accumulated losses of more than Rs 50,000 crore and debt of about Rs 55,000 crore, Air India can still be a prized asset for the buyer.

Though there is a perception that the national carrier is a lumbering behemoth not fit to churn out profits in a sector where margins are thin, Air India is actually not too big to turn around.

Take employee-to-aircraft ratio, an indicator of efficiency as well as the scope of a turnaround. Aakansha Kaushik, a research scholar at JNU, writes in an article that the ratio is comparable to other profitable airlines.

In 2015-16, Air India’s employee-to-aircraft ratio was only 106 for a fleet size of 136. IndiGo, the only large consistent profit-making carrier, operated at a higher employee-to-aircraft ratio of 116 though a lower fleet size of 106. IndiGo also had a lower number of maintenance-and-overhaul personnel than Air India. The national carrier has its own maintenance and repair centre, which gives it cost advantage over other players.
04/07/17 Economic Times