After the Union Cabinet allowed the divestment of loss-making Air India, several companies such as Tata Group, Indigo and Qatar Airlines have shown interest. But heavy losses and debt remain big concerns of a prospective buyer.
However, despite its accumulated losses of more than Rs 50,000 crore and debt of about Rs 55,000 crore, Air India can still be a prized asset for the buyer.
Though there is a perception that the national carrier is a lumbering behemoth not fit to churn out profits in a sector where margins are thin, Air India is actually not too big to turn around.
Take employee-to-aircraft ratio, an indicator of efficiency as well as the scope of a turnaround. Aakansha Kaushik, a research scholar at JNU, writes in an article that the ratio is comparable to other profitable airlines.
In 2015-16, Air India’s employee-to-aircraft ratio was only 106 for a fleet size of 136. IndiGo, the only large consistent profit-making carrier, operated at a higher employee-to-aircraft ratio of 116 though a lower fleet size of 106. IndiGo also had a lower number of maintenance-and-overhaul personnel than Air India. The national carrier has its own maintenance and repair centre, which gives it cost advantage over other players.
Passenger load factor, which indicates capacity utilisation of an airline, is another positive for a prospective buyer. Air India’s load factor has improved consistently over the years and has equalled the worldwide average for the airline industry. But it is still slightly below the level of other major players in the Indian airline Industry.
Other factors that can lure a buyer are Air India’s large asset base, international flying rights, membership of the Star Alliance, valuable slots at big international airports and three profit-making subsidiaries.
Air India’s three profit-making subsidiaries are Air India Express (low-fare international carrier), AI Transport Services (ground handling unit) and AI-SATS (a 50:50 ground-handling JV with Singapore Airport Terminal Services). Air India Express reported a net profit of Rs 296.7 crore in 2016-17.
It was due to all these factors that Aviation Secretary R N Choubey said recently that Air India had huge value and would find many takers. “In the past three years, we have turned around Air India operationally. The airline is now cash positive,” Choubey said.
