'Enough AI assets to match debt;govt should resist cheap sale'

Mumbai: Air India's tangible and intangible assets can well match its over Rs 52,000 crore debt burden and the government should resist a "distress sale" of the carrier, according to sources at the airline.

As calls for divestment, including privatisation, of the loss-making Air India get louder, the civil aviation ministry is looking at all possible options for the airline's revival.

Staying afloat on taxpayers' money, the carrier is estimated to have debt of over Rs 52,000 crore -- a key factor behind the clamour for sale.

Finance Minister Arun Jaitley said last week that the ministry has to explore all possibilities "as to how the privatisation of Air India can be done". The comments came against the backdrop of NITI Aayog submitting its suggestions on the future course for the airline.

Airline sources said that when the government is talking about Air India's debt, it should also consider the assets side.

"No other airline in the country has so much of assets on its balance sheet as much as Air India. In fact, there are corresponding assets against the total debt of about Rs 52,000 crore," the sources said.

On the basis of a valuation carried out in 2007, the airline's gross value, including aircraft and other assets, was pegged at around Rs 40,000 crore.

In 2007, Indian Airlines was merged with Air India -- a deal that is mainly blamed for the financial woes of the carrier.

According to the sources, the airline's current market value could be much higher than Rs 40,000 crore. However, providing for depreciation of assets, the value could be at least around Rs 27,000 crore.

This estimated figure excludes the subsidiaries and other business activities, sources noted.

Air India has four subsidiaries -- Air India Express Ltd (AIEL)), Air India Engineering Services Limited (AIESL), Air India Transport Services Limited (AITSL) and Alliance Air.

"While AIEL is valued at around Rs 8,000 crore, the value of AIESL, which has 31 hangers across airports, is pegged at Rs 3,000 crore and that of AITSL at around Rs 2,000 crore. Besides, Alliance Air also commands a substantial valuation," the sources said.

That apart, joint venture AISATS -- which provides ground handling at a number of domestic airports -- is estimated to be worth around Rs 1,000 crore.

"All these assets combined could be valued at Rs 54,000 crore and thus exceeds its debt of Rs 52,000 crore," the sources said.

Above all, the national carrier counts prime slots at various domestic and international airports, including at London's Heathrow, among its intangible assets.

The airline has eight pair of slots at London Heathrow (LHR), a good number of slots across the US and European airports such as Frankfurt, Milan, Rome, Vienna, Stockholm besides other international airports, the sources said.

They claimed that these slots could be worth several thousands of crores.

Citing the example of LHR, where Oman Air bought one pair of slots for USD 75 million last year, the sources said Air India's slots there would be worth Rs 4,200 crore.

"This apart, Air India brand will have huge valuation. If then six-year old Kingfisher brand was valued at Rs 3,500 crore, the valuation of the over 80-year Air India's brand could be anybody's guess," the sources said.

Further, the carrier has 1,600 pilots and 2,000 aeronautical engineers to certify the aircraft.

"Air India has made huge investment in raising these human resources skill sets, which carries a substantial market value," the sources said.

Despite having such huge assets, the sources alleged that that there are attempts to sell the airline for "cheap" and instead, the government should look at exit in a phased manner over the coming years so that investments made can be recovered.

"The government should not rush for distress sale and offload majority 51 percent stake at this stage," they added.