The Indian government, partnered with the accounting firm Ernest & Young, has released a preliminary information memorandum (PIM), inviting parties to bid for the ailing flag carrier, Air India. The memorandum disclosed the current situation at the airline: it’s most recent financial trials and tribulations, fleet and network situation.
This is the second time in recent years when the Indian government is trying to get rid of the ailing airline. This time, the authorities are looking to offload the whole airline, rather than sell a stake at the carrier.
The sale will also include Air India subsidiaries Air India Express and Alliance Air, two domestic carriers, an MRO service provider, a ground handling company serving Air India group and stakes in two companies, namely Hotel Corporation of India and Air India SATS Airport Services Private.
While the PIM highlights that Air India has the highest market share on international traffic from India-registered carriers and is the third-largest domestic carrier, which also acts as a feeder to the carrier’s hubs, the financial situation at Air India is problematic.
For the past five financial periods, the airline has not posted a single profitable year, the report indicates. In the last reported financial year between 2018 and 2019, Air India posted a loss after tax of $1.1 billion (INR 85.5 billion), with a negative margin of 32%. Furthermore, during the same financial period, the airline achieved a Revenue per Available Seat Kilometer (RASK) of INR4.1, while the Cost per Available Seat Kilometer (CASK) was INR4.8. Excluding fuel, CASK measures at INR3.2.
Furthermore, a potential investor will have to absorb a debt of $3.2 billion (INR232 billion), including current and non-current liabilities that amount to $1.2 billion (INR87.7 billion). On the bright side, a potential buyer will receive an abundance of domestic and international slots in Indian and various International airports.
Currently, Air India has a fleet of 121 aircraft, 16 of which are grounded, according to the PIM. Three of the grounded aircraft are Boeing 787-8 Dreamliners that are owned by the airline, rather than leased. Furthermore, the Indian airline also owns four Boeing 747-400s, but since the aircraft are to be transferred to Alliance Air, they were unaccounted in the memorandum.