I hope the GOI gets out of its own way and manages to sell AI, because I think whoever buys AI has to start preparing for the future. AI's long haul routes, widely accepted as the only profit making routes in AI's network, are dependent on economic long-haul aircraft. The 77Ws are underutilized, and stretched to their limits operating the NA routes. It will be time to decide on the replacement aircraft in two years' time, assuming seven or eight year turnaround period. Right now the A359 looks to be the prime candidate.

devmapper wrote:

With respect to @dtw2hyd's claims about leases, no, AI owns most of the properties in question. AI owns quite a umber of hangars, some even at non-hub airports http://aiesl.airindia.in/heavymaint.aspx. As for the building at Nariman Point, AI has vacated most of the building, but it still owns it. Which is why AI was able to lease out floors to SBI and the Shipping ministry. I'll have to call you out on this @dtw2hyd, https://en.wikipedia.org/wiki/Template:Citation_needed. With respect to loans in the last two months, bridge loans are not long term loans, all airlines get bridge loans to make the upfront payment to take delivery of aircraft. Usually in a SLB model, the bridge loans are paid off completely the moment the airline sells the aircraft to a lessor. There hasn't been any working capital loans in the last few months, in fact AI is seeking short term working capital loans right now..

You are throwing the term "owns" loosely. If your property on leased land and has a mortgage and equity loan, you own nothing, hence you cannot sell until you pay off the loan. No one even bid until they are clear of the title status, so renting out is the only option.
How many times GoI/AI tried to sell real estate?

If these were short-term loans why would AI end up with $6.5B total working capital "short-term" bridge loans since 2006?
How many times does GoI/AI try to restructure debt?


Why should AI take a $555 Million loan for VVIP planes it has no need. Who will buy and lease back two VVIP 77Ws at $215M each and one civilian 77W at $135. In 2018 these will be worth less than $100M. SLB market is very bad. Any other country would have directly paid for these planes from the defense budget.

GoI talk and actions don't match. GoI committees and consultants valuation mean nothing.

Invite bids from global consortiums like QR,Qatar state, and Kushner. Let them assess the value, and bid. Pick the bid with most returns. Let them keep as a whole or sell piecemeal.

If GoI tries to split, every other entity will thrive, AI(International) will go down rather quickly. Most of the $9.5B debt is with AI(Int). Other entities are keeping it afloat.

lightsaber wrote:

The units will be sold with reduced debt.

With that level of subsidy, for that is what most of the debt is, the GoI must get out of AI. It will be expensive, but better than the current blank cheque.

4 or more groups. By breaking it up, the political pressure goes away.

I agree larger bids would be foreign airlines.

They are already separate entities, any other government would have stripped (negative) AI brand and run those as independent units. Just to play with accounting GoI bundles good and bad.

- AI-SATS is already a SATS JV. - profit making
- AIATSL(Ground Handling unit) already has 3 bidders.
- AIESL is venturing out already. SpiceJet and Jet Airways are its new customers. It signed a JV with Singapore Airlines Engineering. It started line MX at Sharjah. Managing DWC MRO project.
- AI Express(LCC) is profit making
- Pawan Hans (Heli ops unit) - profit making
- With Indigo's entry in TP market, AI regional will lose its market share. Government not able to fund regional connectivity scheme, because no airline is paying into the fund.
- AI Domestic doesn't have may financed planes. Lean operation and not much debt either.

That leaves the slacker of the family AI International. If not so intelligent GoI sells all other units except AI (International) because of no one ready to buy, Indian taxpayers will be even in the worse state.

Why would buyers of other units take part of widebody loans or working capital used to train 777/787 crew?

dtw2hyd wrote:

lightsaber wrote:

The units will be sold with reduced debt.

With that level of subsidy, for that is what most of the debt is, the GoI must get out of AI. It will be expensive, but better than the current blank cheque.

4 or more groups. By breaking it up, the political pressure goes away.

I agree larger bids would be foreign airlines.

They are already separate entities, any other government would have stripped (negative) AI brand and run those as independent units. Just to play with accounting GoI bundles good and bad.

- AI-SATS is already a SATS JV. - profit making
- AIATSL(Ground Handling unit) already has 3 bidders.
- AIESL is venturing out already. SpiceJet and Jet Airways are its new customers. It signed a JV with Singapore Airlines Engineering. It started line MX at Sharjah. Managing DWC MRO project.
- AI Express(LCC) is profit making
- Pawan Hans (Heli ops unit) - profit making
- With Indigo's entry in TP market, AI regional will lose its market share. Government not able to fund regional connectivity scheme, because no airline is paying into the fund.
- AI Domestic doesn't have may financed planes. Lean operation and not much debt either.

That leaves the slacker of the family AI International. If not so intelligent GoI sells all other units except AI (International) because of no one ready to buy, Indian taxpayers will be even in the worse state.

Why would buyers of other units take part of widebody loans or working capital used to train 777/787 crew?

Again, your whole argument rests on the notion that the Indian Govt. has an obligation to run Air India.
However, you yourself state that Air India brand will continue to loose value as other private airliners thrive.

Seems like the govt. is wiser now and not try and peddle any consumer goods. Examples like Modern Bread, Scooters India, HMT, and so forth abound, where after the exit of the govt. the sector itself has been thriving.

Time the Unions got wiser.

vadodara wrote:

Again, your whole argument rests on the notion that the Indian Govt. has an obligation to run Air India.

Not sure how you parsed my post to arrive at that.

GoI could have spun off profit-making units long back. Or have separate entities to show the good and bad. Now everything is bad.

My suggestion is not to is stuck with the only turd in the family. Whatever happens, GoI shouldn't have AI(Int) under its fold.

With the financial expert leading this effort, most likely AI(Int) will be the only government entity at the end of this process.

dtw2hyd wrote:

vadodara wrote:

Again, your whole argument rests on the notion that the Indian Govt. has an obligation to run Air India.

Not sure how you parsed my post to arrive at that.

GoI could have spun off profit-making units long back. Or have separate entities to show the good and bad. Now everything is bad.

My suggestion is not to is stuck with the only turd in the family. Whatever happens, GoI shouldn't have AI(Int) under its fold.

With the financial expert leading this effort, most likely AI(Int) will be the only government entity at the end of this process.

Which is a constantly repeated assertion that isn't rooted in fact. Why do you think AI international ops will remain under the GoI? Also the statement about them selling it off before - yes they could have sold it off a long time ago, but they didn't. So constantly talking about that makes no sense.

AI(int) has good routes and slots. Someone will buy it. If AI improved their service and aircraft and hard/soft product they would pose a legit challenger to the ME3 for the lucrative high end market. AI has potential, someone will buy it and harness that. Just because AI(int) under the GoI is a disaster, doesn't mean it has to be.

And IF they do not find a buyer, then they can liquidate the AI assets and shut it down. That is an option on the table, given that the GoI is no longer under any obligation to prop up Air India.

They should keep Air India Express cause thats the only profitable venture they have now.

They should sell their widebodies and even the A320neos and slots to Indigo or Vistara.

The 20 year old A320's and their 747's will sadly go to the boneyard or maybe they will keep one 747 for gov usages.

Slash787 wrote:

They should keep Air India Express cause thats the only profitable venture they have now.

Why? I don't think the GoI wants to (or should) stay in the business at all.

AI Express being profitable means they can sell it for more. Cash out and get out of the consumer good business entirely.

dtw2hyd wrote:

vadodara wrote:

Again, your whole argument rests on the notion that the Indian Govt. has an obligation to run Air India.

Not sure how you parsed my post to arrive at that.

GoI could have spun off profit-making units long back. Or have separate entities to show the good and bad. Now everything is bad.

My suggestion is not to is stuck with the only turd in the family. Whatever happens, GoI shouldn't have AI(Int) under its fold.

With the financial expert leading this effort, most likely AI(Int) will be the only government entity at the end of this process.

So I can't figure out where you are coming from with your pov on AI's debt. As many have said there is nothing weird about the GOI writing off the debt caused by poor management (while keeping the debt related to the aircraft). And remember the banks are all government owned, so the GOI won't hurt anything and the tax payer is no worse off. Is your view / concerns about his deal all driven by the fact that the GOI is not selling AI to a foreign airline? That's where I totally disagree with you. Foreign airlines do not want to develop indian aviation (especially the ME3). They just want to push traffic to their hubs in the desert. Let the Tatas/SQ buy AI. India will be better for it. The GOI's announcement that they are splitting the baby is clearly a way to satisfy Indigo and/or SpiceJet. And I'm fine with that. In the end a stronger Indigo and a stronger AI/Vistara will be good for Indian aviation.

CaliguyNYC wrote:

So I can't figure out where you are coming from with your pov on AI's debt. As many have said there is nothing weird about the GOI writing off the debt caused by poor management (while keeping the debt related to the aircraft). And remember the banks are all government owned, so the GOI won't hurt anything and the tax payer is no worse off. Is your view / concerns about his deal all driven by the fact that the GOI is not selling AI to a foreign airline? That's where I totally disagree with you. Foreign airlines do not want to develop indian aviation

AI is a money circulation scheme. GoI gives bailout money and AI pays back as Bank interest and other taxes and duties. Interest itself close to $750M/year to Indian Banks.

By writing off $6.5B this circulation stops. So goal should be to minimize this number so budget won’t sink. Without $750M some banks will fold.

Tatas couldn’t run clean slate FSC or LCC. What makes you think they are capable of running a Legacy with all the burdens.

AI(Int) is an operational sweetheart and financial turd. People seems to have trouble distinquishing this.

CaliguyNYC wrote:

So I can't figure out where you are coming from with your pov on AI's debt. As many have said there is nothing weird about the GOI writing off the debt caused by poor management (while keeping the debt related to the aircraft). And remember the banks are all government owned, so the GOI won't hurt anything and the tax payer is no worse off. Is your view / concerns about his deal all driven by the fact that the GOI is not selling AI to a foreign airline? That's where I totally disagree with you. Foreign airlines do not want to develop indian aviation (especially the ME3). They just want to push traffic to their hubs in the desert. Let the Tatas/SQ buy AI. India will be better for it. The GOI's announcement that they are splitting the baby is clearly a way to satisfy Indigo and/or SpiceJet. And I'm fine with that. In the end a stronger Indigo and a stronger AI/Vistara will be good for Indian aviation.

dtw2hyd is convinced that half this board is on the EK payroll to badmouth AI. Like, there really isn't a point to trying to reason beyond this.

dtw2hyd wrote:

lightsaber wrote:

The units will be sold with reduced debt.

With that level of subsidy, for that is what most of the debt is, the GoI must get out of AI. It will be expensive, but better than the current blank cheque.

4 or more groups. By breaking it up, the political pressure goes away.

I agree larger bids would be foreign airlines.

They are already separate entities, any other government would have stripped (negative) AI brand and run those as independent units. Just to play with accounting GoI bundles good and bad.

- AI-SATS is already a SATS JV. - profit making
- AIATSL(Ground Handling unit) already has 3 bidders.
- AIESL is venturing out already. SpiceJet and Jet Airways are its new customers. It signed a JV with Singapore Airlines Engineering. It started line MX at Sharjah. Managing DWC MRO project.
- AI Express(LCC) is profit making
- Pawan Hans (Heli ops unit) - profit making
- With Indigo's entry in TP market, AI regional will lose its market share. Government not able to fund regional connectivity scheme, because no airline is paying into the fund.
- AI Domestic doesn't have may financed planes. Lean operation and not much debt either.

That leaves the slacker of the family AI International. If not so intelligent GoI sells all other units except AI (International) because of no one ready to buy, Indian taxpayers will be even in the worse state.

Why would buyers of other units take part of widebody loans or working capital used to train 777/787 crew?

How does AI go through so much money if so many units are profit making? Somehow the breakup and sum do not add up. AI needs huge subsidies every year yet is almost break even? Are you forgetting that operating expenses exclude the needed corporate overhead and advertising. Either way, AI is consuming too much money. End the money games. I hope as many employees as possible keep their jobs, but right now Air India is the same as Alitalia, South African Airlines, and MAS. Always one turn around away from profit and just not getting there.

Heck, how long has it been since EK had expanded air service rights to India? I'm not saying EK has to be granted more, but chocking service in and out of India doesn't help the national economy grow.

How is AI losing money when India has had 36 months of double digit traffic growth?
http://www.livemint.com/Companies/2xqEL ... r-36t.html
"Iata expects India to displace the UK as the third-largest aviation market by 2026."

Huh, that would be interesting to finally become the #3 air market.

Bummer AI wasn't able to turn around. But given the decades of chances lost.



My take is each bid will be willing to take on so much debt. If too much is asked, it is time to liquidate poor running divisions. Oh wait, that is obvious to everyone:
"A report in The Economic Times on Monday said that of the airline’s total debt of Rs52,000 crore, about Rs33,000 crore will be transferred to a special purpose vehicle (SPV). "
http://www.livemint.com/Money/NyoVGKSYm ... ffloa.html

Getting rid of 2/3rds of the debt is obviously required. There has to be severe cost cutting unfortunately. For as soon as operations go private, the cash feed will be cut.

Lightsaber

CaliguyNYC wrote:

Let the Tatas/SQ buy AI. India will be better for it. The GOI's announcement that they are splitting the baby is clearly a way to satisfy Indigo and/or SpiceJet. And I'm fine with that. In the end a stronger Indigo and a stronger AI/Vistara will be good for Indian aviation.

Precisely. Split AI services like engineering/ground handling and such. Let others draw the water from the same well. From GOI's perspective, best use of the asset.

Regarding the routes, long haul with slots at airports like LHR, JFK, ORD are especially valuable. And so are slots at BOM. Let people assess their value and bid for them.

lightsaber wrote:

How does AI go through so much money if so many units are profit making?
Lightsaber

Profit-making entities are tiny in nature, doesn't make a dent.

$1B of $3+B annual revenue goes for debt servicing.

$750M interest payment on $5B debt to sister banks??? (last two months debt jumped to $6.5B)
(vs)
$220M debt serving fees on rest of $3B debt to Global banks.

Sister banks are bleeding AI.

lightsaber wrote:

dtw2hyd wrote:

lightsaber wrote:

Heck, how long has it been since EK had expanded air service rights to India? I'm not saying EK has to be granted more, but chocking service in and out of India doesn't help the national economy grow.


Lightsaber

Chocking services out of India??? Come on India has been very generous with the ME airlines in general. The world doesn't revolve around EK (who has great connectivity into India). Couple of things: (1) Other ME airlines have increased India flights at the time EK/QR have been maxed out. This has the affect of adding capacity (just not to EK) - so EK loses but capacity increases (2) India gave a huge increase to EY and allowed 9W to take a huge amount of seats India-AUH which would basically be used to feed EY's global network - EY screwed this up but no capacity choking (3) India has been pushing the UAE government to apply all UAE unused seats to where ever they are needed (meaning Dubai) but the free market UAE government has been fighting that - so the #1 group chocking India-UAE flights are the UAE and its airlines - free market works both ways just not give give give (4) after a long time you are seeing growth by India airlines flying abroad (see AI's expansion on nonstops and 9W's expansion plus virtual JV with DL/AF/KL/VS) - all long time over due plus there have been new entrants into India lie Brussel airlines. There is no capacity issue into India. India has some of the lowest long haul fares int he world. India's issue is lack of nonstop connectivity and a global hub. Its not 1995 when getting a seat into/out of India was a thing (5) assuming the privatization of AI is real and Indigo / Spice want to launch LH LCC - I say the GOI should continue to not grant seat increases to the ME - let AI/Indigo/Spice plans play out over 2018. Plus AC has seen success on their nonstops,. Maybe we will see 9W make a swing by adding one nonstop to the US plus HYD-AMS. So things are moving in the right direction. Oil is cheap and Indians can already fly to the US for sub $900 and even $800 fares - cheaper than NYC-Europe many times.