Air India focuses on higher efficiency, paring debt for turnaround

IN an attempt to revive its fortune, cash-strapped Air India is focusing on increasing operating efficiency and simultaneously reducing working capital- and aircraft-related debt, according to the turnaround plan tabled in 2012. The national carrier is also trying to monetise its assets in India and abroad to increase revenues.

The total debt of Air India in FY15 stood at around Rs 50,000 crore, of which Rs 19,000 crore is related to aircraft. A senior official of the airline told FE that the airline has managed to repay 50% of the total airline-related debt.

“We have also repaid close to 5% of the total working capital debt and expect to post an operating profit of around R6 crore in the current fiscal,” the official said.

The repayment process started from October 2014 and loans will be repaid in another 52 installments. The airline, which is struggling to make operational profit for the past few years, is also trying to monetise its assets such as the Air India building in Mumbai and other places.

Most of the Air India building at Nariman Point in Mumbai has been rented out to private firms and some of the space has also been allotted to government agencies such as the service tax and income tax departments. The official said Air India is charging around Rs 300-Rs 350 per sqft from tenants.

Four flats in the Sterling apartment, located in Peddar road in South Mumbai, will be transferred to State Bank of India for Rs 88 crore. These developments may help the airline reduce debt in the current financial year.

“We are also trying to monetise assets in places like Mauritius, Nairobi and Hong Kong. We also have a memorandum of understanding with National Building Construction Corporation pertaining to development of the properties owned by Air India,” said the official.

In order to compete with other private airlines and reduce the number of old aircraft in its fleet, Air India has decided to order 29 Airbus 320 Neo aircraft. These aircraft will replace 16 planes which are considered old in the existing fleet. Of the 29 A320 Neo, 14 will be leased from Kuwait-based lesser Alafco. The tender for the remaining A320 neo will be on the company’s website within 10 days.

Currently, Air India maintains 66 aircraft, of which 58 are in operation.

“We are hopeful that second half of the year will be good for us as ATF prices are benign,” said the official.

The airline in November sold 31 Dreamliner aircraft to Singaporean lessor for Rs 7,000 crore. Subsequently, they were taken back on lease.

The central government has invested more than Rs 22,000 crore in Air India in the past three years. According to the data available with the DGCA, the national carrier has market share of 15.5% and carried 10.88 lakh passengers in October.