Friday, July 28, 2017

Air India sale: With a likely profit of Rs 297 cr, AI Express only shining star among subsidiaries

New Delhi: The government has begun deliberations over the methodology for disinvesting stake in Air India and its subsidiaries. IndiGo, India’s largest airline by passengers, has said it would be interested in the main airline and just one of its subsidiaries – Air India Express. Even here, IndiGo’s interest would perhaps be limited to the combined international operations of AI and AI Express. Will the government actually carve out the lucrative international operations of AI and AI Express for the convenience of just one potential bidder, this remains to be seen. But IndiGo’s pick of the lot is interesting, since these are the only two parts of the whole Air India pie which have reported improved financial performance last fiscal. Air India’s subsidiaries are Air India Express, Alliance Air, Hotel Corporation of India, AIATSL and AIESL.
Remember, the disinvestment of Air India is a long and difficult task since the airline has assets in terms of routes, international airport slots and bilateral flying rights as well as owned aircraft but is also saddled with Rs 48,876. 81 crore of debt. It has been losing domestic market share to nimble private airlines despite surviving on government dole for the last many years. There has been some talk of the government writing off a large part of the debt or even the entire thing but this wouldn’t be an easy decision to take. Either way, the Group of Ministers headed by Finance Minister Arun Jaitley, tasked with laying the disinvestment roadmap, has only held one meeting till date. And sources tell us senior officials of the ministry of civil aviation have sought independent studies from two aviation consultants, with suggestions on how to carve out the assets of the airline and get more than just one bidder interested in the sale.
In this backdrop, it is interesting to see that only Air India and Air India Express reported improved financial performance last fiscal – the other subsidiaries remained mired in red ink. According to a written reply in Lok Sabha on Thursday, while Air India could show a nominal operational profit and a narrower net loss compared to the previous fiscal, Air India Express could also show a net profit though lower than what was reported in 2015-16. Hotel Corporation of India, AI Engineering Services, Alliance Air remained loss making in 2016-17. Will buyers then want the airline along with all of its subsidiaries?
27/07/17 Sindhu Bhattacharya/First Post