Core assets like AI Express, AI-SATS, airport slots to be part of AI sale

The sale of Air India will involve its core aviation assets packaged with Air India Express and AI-SATS. According to a government official, all non-core assets, like the Air India building in Mumbai and other offices, will not be a part of the sale.

The government has initiated the process for strategic disinvestment of debt-laden Air India as part of efforts to revive the national carrier.

Air India assets for sale

* Core aviation assets include aircraft, slots at airports and flying rights to various countries.

* Air India Express

* AI-SATS (a ground-handling joint venture with Singapore Airport Terminal Services (SATS))

Air India Air Transport Services and Air India Engineering Services — will be sold separately.

Air India has total debt of Rs 52,000 crore, of which about Rs 33,000 crore is on account of working capital loans, which will be transferred to the SPV, according to Economics Times.

The rest is against aircraft purchases and will be included with the company that’s put up for sale.

Air India operates to 44 foreign destinations and 72 domestic destinations and has assets in each of these cities.

Union minister Jayant Sinha on Friday said the domestic and international operations of Air India would be sold together.

"What we will be offering through the bidding process is the integrated airline (Air India), which means both domestic and international operations (together)," Sinha, the Minister of State for Civil Aviation said.

On the disinvestment process, he said the government is still in the process of identifying which subsidiaries of Air India should be offered separately.

"Even if they are offered separately if you want to bid for each one of them and re-integrate them, we are providing flexibility," the minister said.

SPV to house Air India’s non-aircraft debt

Suitors of Air India may not be able to bid for the vast plots of land and real estate the national carrier holds in prime locations. The government is likely to hive off the non-core assets of the airline, including real estate, land parcels and art treasures, into a separate company before calling a formal bid.

All non-core assets, like the Air India building in Mumbai and other offices, will become part of the special purpose vehicle (SPV).

These were among decisions taken by the Air India sale committee headed by finance minister Arun Jaitley that includes the ministers of aviation, commerce and railways. 

The SPV will house Air India’s non-aircraft debt as well as non-core assets. “Assets like Air India offices, residential quarters, land and even ticketing offices — as airlines today prefer internet booking over ticketing offices — will become part of the SPV,” said the official. “All non-core aviation assets will be transferred to the SPV.” 

A preview of Maharaja’s assets

— Primary non-core assets of Air India

— Property / City

— Airlines House, Gurudwara Rakabgunj Road / New Delhi

— Air India Building, Nariman Point / Mumbai

— One villa, two apartments / Hong Kong 

— Premium office space / Berkshire, London

—  Staff quarters, Vasant Vihar / New Delhi 

— Premium office space, UIC Building / Singapore

In addition, Air India also owns one of the largest collections of paintings, antique furniture

Suitors of Air India

The Tata group, which has stakes in Vistara and AirAsia India, has been mentioned as a possible suitor. However, IndiGo is the only domestic carrier that has officially shown interest in buying Air India. Companies like Bird Group and Celebi—both of which are involved in ground handling—have shown interest in that part of Air India's business.

According to a top government source, "The economics of the game will change completely for whichever airline gets Air India. With its 14% domestic and 17-18% international market share, getting AI will be a paradigm shift for the successful bidder. Other airlines like Jet and possibly even SpiceJet will have no option but to bid for AI".