In December when Air India is transferred to the Tatas, the national carrier would have burnt a hole of roughly ₹ 1,57,339 crore in the government's pocket over a decade, according to valuation experts.
The estimate is based upon the amount spent on the airline since 2009-10, its debt and pending liabilities that the government will take over when the transaction closes, the cash receivable from the Tatas, and the value of Air India's residual assets that may be monetised.
The Tata Group emerged as the winning bidder for acquiring the entire company, including wholly-owned subsidiary Air India Express and 50 per cent stake in Air India SATS. After the transaction closes, the government will be left with Air India's non-core assets and ₹ 46,262 crore of debt, which will be transferred to Air India Assets Holding Ltd. (AIAHL), a special purpose vehicle designed by the government to provide unified asset holding services.
The Centre gets to keep four Air India subsidiaries – Air India Air Transport Services Ltd., Airline Allied Services Ltd., which runs Alliance Air, Air India Engineering Services Ltd., and Hotel Corporation of India. These subsidiaries have been transferred to AIAHL.
Aside from stakes in the subsidiaries, AIAHL was formed to acquire Air India's assets, including paintings (there are about 40,000 pieces of art which is worth crores of rupees), artifacts and other non-operational assets, non-core assets, immovable and moveable properties, accumulated working capital loans not backed by any asset, and other assets/liabilities or of its subsidiaries.
As per media reports, the government will now look to monetise the four subsidiaries and the non-core assets of Air India, said Tuhin Kanta Pandey, secretary in the Department of Investment and Public Asset Management.
Difficult To Find Buyers For Air India's Subsidiaries
After netting off the notional value of the assets, the carrier would have cost the taxpayer ₹1,57,339 crore, according to valuation experts, reported Moneycontrol. However, experts are of the opinion that the government will find it difficult to generate substantial value from the sale of Air India's subsidiaries and may even need to hold on to them to sustain Alliance Air's operations.
An aviation expert said that while the value of Air India's subsidiaries may be about ₹ 1,000 crore, it will be hard for the government to find potential buyers for them. The book value of Air India's non-core assets, which include paintings, expensive accessories, buildings, and land, is about ₹ 14,718 crore. However, this is a notional figure and the government may struggle to get this amount from their sale, property valuation experts told the website.
The biggest non-core assets with the government include land worth₹ 7,000-8,000 crore, buildings worth ₹ 3,000-4,000 crore, and paintings and other accessories worth ₹ 2,000 crore, according to senior government officials who cited surveys carried out in 2018.
Some noteworthy assets include Air India's hangar and maintenance facilities, residential properties, the iconic Nariman Point building in Mumbai, the Air India headquarters in New Delhi and the reservation office building at Safdarjung airport in the national capital.
The government has decided to give the Nariman Point building, the Air India headquarters, and the Safdarjung office to the Tatas for two years and all of Air India's residential apartments for six months in order to ensure a smooth transition. The government will likely look to monetise these properties once they are returned, officials said. Government officials expect the Nariman Point building to fetch about ₹3,000 crore. But valuation experts are a bit skeptic and said it wouldn't exceed ₹ 2,000 crore.
In New Delhi, the carrier's commercial property located on Baba Kharak Singh Marg near Connaught Place is spread across 2.5 acres and is currently valued at around ₹ 1,100 crore. In Chennai, Air India's Unity Complex Building spread over 3 acres with a built-up area of 1.25 lakh square feet is currently valued at around ₹ 55 crore, experts said. Another property in Anna Salai at Teynampet spread across 1.5 acres is valued at ₹ 80 crore.
The carrier's residential colony in New Delhi's Vasant Vihar area is estimated to be worth about ₹ 2,700 crore, valuation experts told Moneycontrol. The airline's property at Nerul in Navi Mumbai comprising 500 flats with a built-up area of 1.3 lakh sq ft is valued at ₹ 80 crore.
The valuation of the Vasant Vihar and Nerul properties is inclusive of land costs. Individual apartments in these colonies cannot be sold, people aware of the matter said. Following the airline's sale, the Tatas will take over ₹ 15,300 crore of Air India's total debt of ₹ 61,562 as of August 31. The remaining ₹ 46,262 crore will be transferred to AIAHL.
AI Unions Threaten Indefinite Strike
A group of Air India unions have threatened to go on an indefinite strike from November 2, if they are forced to vacate their residences at the Air India colonies. The Joint Action Committee of Air India Unions, comprising of Air Corporation Employees Union, Aviation Industry Employees Guild, and All India Service Engineers Association, called for the strike.
Terming the notice to vacate their accommodation an "unfair labour practice", the union wrote to Meenakshi Kashyap, General Manager (Industrial Relations) on October 13. It said that the "staff normally lives in the colonies with their families until retirement and displacing them from their homes whilst in service amounts to unilaterally withdrawing a privilege and usage ---- a service condition and legal right, that has been in existence for several years/decades."
The engineering unions said that "staff quarters are given mostly to staff who do not have a house in Mumbai and are not paid HRA as well as monthly charges levied on them. If they are displaced from their homes, at the fag end of their service, they and their families will virtually be on the streets since they can't pay the huge rents or buy a house at exorbitant prices in Mumbai."
The carrier currently has 12,085 employees, 8,084 being permanent, and 4,001 contractual staff. Air India Express meanwhile has 1,434 employees.