The government’s plan to monetise Air India’s real estate assets as part of the plan to privatise the airline could run into trouble since the state-owned carrier does not own the land on which some of its marquee buildings are located. Even if the building are sold along with Air India, the ability to monetise the real estate is not fully clear. The land on which the buildings of Air India are built belong to the urban development ministry in New Delhi and the Maharashtra government in Mumbai.
For instance, the marquee 220,000 sq ft Air India Building at Nariman Point in Mumbai is built on land leased by the Maharashtra government. Similarly, Airlines House on Gurudwara Rakabganj Road in the capital is built on land leased by the urban development ministry. Air India also owns a building on Baba Kharak Singh Marg at Connaught Place in New Delhi, and staff quarters at Vasant Vihar. These are also built on the land leased by the urban development ministry.
Officials said that for the sale of these assets, the permission of the owner of the land needs to be taken which would open a Pandora’s box because these agencies would have leased land to other public sector undertakings as well. Sources said that a group of ministers led by finance minister Arun Jaitley will have to grapple with these issues as it gets down to decide on the modalities of the sale of Air India.
“At this stage there’s no clarity. A lot of things are unclear. Let the group of ministers meet and deliberate on the issues involved. Air India is certainly not the owner of the land on which its buildings are made but the lease can be held by the new owners of the airline if the government manages to sell it. However, selling the buildings would be a much more complex exercise,” said an official.
The official said that the civil aviation ministry has internally made a rough estimate of the value of Air India’s physical assets including its 115-strong aircraft fleet (including Boeing Dreamliners), land parcels, buildings and also its valuable flying/landing rights and parking slots at airports across the world. These assets are worth around Rs 25,000-30,000 crore, according to him but the calculation would go awry if the real estate assets cannot be monetised.
It is not for the first time that the idea of selling Air India’s real estate India is being considered. The United Progressive Alliance government had incorporated this in its plan as part of the turnaround plan it approved for the airline, but nothing came of it.
While efforts have been made to revive the airline, Air India has not reported a profit in at least a decade; in 2015-16 it posted an operating profit of `105 crore and reduced its net loss to Rs 3,837 crore compared with Rs 5,859 crore in 2014-15.
For FY17, though the numbers have not been declared, it is estimated that its net loss would be around Rs 3,000 crore on a revenue of `22,251 crore. The Centre has already infused Rs 28,000 crore in the airline over the past few years. The airline is incurring a cash loss of `200 crore every month.