Air India plans to sell properties

Written by Shaheen Mansuri | Mumbai | Updated: May 16 2011, 07:50am hrs
Public sector airline Air India (AI) is looking to monetise its commercial assets which it owns within the country and globally to earn as much as R5,000 crore annually. The airline, riddled with R40,000 crore debt, has properties in Europe, the UK, Tokyo, Hong Kong and the US.

Back home, it has assets in Delhi, Mumbai, Coimbatore, Kochi and Thiruvananthapuram. The airline has recently taken a decision to sell its commercial property in Paris for R10 crore. The carrier has recently formed a property committee headed by the airlines CMD, Arvind Jadhav, an independent director, and Prashant Sukul, joint secretary, ministry of civil aviation who meet regularly to devise strategies by which it can monetise its commercial assets. S Venkat, executive director,(finance) and company secretary at National Aviation Company of India (Nacil) that runs AI said, Our property committee is vetting proposals for either leasing of or selling off properties across the globe. According to sources, the airline has around 5 lakh square feet of space across the globe which, can partly be monetised. For instance, the carrier has an 8,000-square feet sales office in Tehran which caters to the diplomatic mission. In Cairo and major parts of the Gulf region, the airline has many spacious offices which can also be commercially exploited. The airline wants to either sell off these properties or lease the additional space for commercial benefits.

In London, the airline has many commercial and sales offices in proximity to the airport. The airline will sell off some spaces in this city to generate revenue, sources said.

However, the carrier will not sell its profit-making outstation offices like the ones in San Francisco and Los Angeles as they churn in healthy revenues on account of healthy loads factors each month. Offices, or residential complexes in countries where the airline is not generating enough revenue will be sold off with the concerned station manager being transferred to another destination. Sources at AI say, within the country itself, the carrier has around 40 lakh square feet of space which can be let- out or sold.

There is an air of optimism within the organisation, as most properties the carrier owns, are either partially occupied by the airline or in some cases there are properties from which the staff can be shifted to another AI office and the freed space can be leased to corporates for official use.

For instance, the 21-storied AI headquarters in Mumbais Nariman Point, the costliest business district in the city, is partly occupied by AI with its administration, public relations, commercial operations department being housed in the premises with a lot of free space available which can fetch a lease rental of around R350 per square feet. Approximately, the AI building in Mumbai has in total six lakh square feet space which is partly occupied by the airline staff. The carrier has recently surrendered 7,000 square feet space in Kolkata for commercial purposes.

The airline is aggressively pursuing plans to monetise its assets mainly for two reasons. First, the airline needs to pay a huge amount towards its aircraft purchases. AI had, in 2005-06, placed orders for aircrafts worth R45,000 crore for 68 Boeings and 43 Airbus aircrafst of which the airline has already received deliveries from Airbus and has to receive over 20 aircrafts from Boeing of which the average cost ranges from $40 million to $145 million. Second, the airline wants to enhance revenue which currently stands at R7, 250 crore for the April-November 2010 period. The company wants to enhance this by at least 35% in 2011 by deploying more aircrafts with improved utilisation hours. AI has a market share of 17.5% when compared with competitors like Jet Airways and its subsidiary JetLites 26% and Kingfisher Airlines 18%. The public sector airline has accumulated losses of over R13,000 crore, since it merged with Indian Airlines in 2007. It got R800 crore in 2009-10 and R1,200 crore in 2010-11 from the government to offset its losses. A proposed infusion of another R1,200 crore in the current financial year will take its equity base to R3,345 crore.

The company has embarked on a turnaround plan since 2009 with an aim to turn the carrier profitable. The plan envisages maximum utilisation of the airlines assets, curtailing loss-making routes, enhancing revenues and hiving off its profit making centres like its maintenance, repair and overhaul into a separate entity.