727200 wrote:

From a strictly business standpoint: tell me again why any investor would even look at a prospectus from a company, who by their own admission, only made money on two routes world-wide?

Because those were operational losses and can be turned around.

What cannot be purchased or acquired easily is the infrastructure, the slots, route network, the brand legacy.

BawliBooch wrote:

It is too early to tell either ways. I see this as a desperate attempt by Modi to reclaim the "reformer" tag that has been severely eroded post disasters like Demonetisation & GST as well as win over corporate cronies who are slipping away. There are rumors of Ambani atleast switching sides. This decline has to be arrested. Hence the attempt to jump back on the "reforms" bandwagon - atleast what passes as reform.

But here is why I would hold my cards on the AI privatisation talk. If AI slips out of Govt control, atleast 3 HUGE PSU banks will fail within 6 months. Can a Govt on the defensive afford the failure of 3 big banks just before the 2019 elections? Here is what many just dont get - Air India is more than just an airline. It is a complex cash rotation scheme that keeps our PSU banks afloat. It is also an instrument of state policy.

Even if Air India is split-apart and sold off piecemeal to cronies, i am willing to bet the Govt will have to setup another state-owned airline from scratch. Think of Srilankan-Mihin Lanka saga in neighbouring Sri Lanka. Its the same dynamics at work.

The most practical solution would be restructure AI's debt to reduce the interest burden (will cost the taxpayer less than the Govt taking over the complete debt before selling off), place the airline under the control of an autonomous management for 5 years and THEN reduce the govt stake to 49% with a public listing. The Govt can recover a substantial chunk of its investment.

But with this approach, cronies like Ajay Singh (SpiceJet) and the Bhatia-Gangwal's wont be able to get their slimy hands on public assets for a dime.

Amusing, you calling Ajay Singh and Bhatia/Gangwal cronies. dtw2hyd calling Ratan Tata names.

Just curious why you left Naresh Goyal out. Afterall, his sources of financing have been the most dubious. Did he launch Jet Airways with Dawood's money or Sonia Gandhi's money? Eitherway, curious why no one is asking him the questions.

At anyrate, what should the govt.s job be? Give hand out's to keep Uddhav Thackreay amused?

vadodara wrote:

At anyrate, what should the govt.s job be? Give hand out's to keep Uddhav Thackreay amused?

Of course, that is what the governments that are darlings of the left are supposed to do. Bankrupt the taxpayer but keep the government worker happy.

unrave wrote:

dtw2hyd wrote:

6E has a bloated workforce than AI, ie., without any significant international operations, engineering or ground handling.

Are you really claiming that AI is a well run profitable airline?

It is not, but any reasonable person with below average accounting or elementary math skills will be able to identify exactly where the problem is.

I color coded to make it simple. Of all seven subsidiaries, ONE is the drag on the entire group.

Ground Handling
1) AIATSL - 10000 Employees Debt free and profitable (EoI from Bird group)
2) AI-SATS - Private JV, Debt free and profitable

Engineering
3) AIESL - 4,000 Employees, Debt free, Absolutely profitable. Without GoI control this will become one of largest MROs in the world (EoI from Airworks and Bird Group)

Airlines
4) AI Express - All contract employees, Debt free or nominal and profitable
5) Pawan Hans - Heli-43, 1000 employees, Debt free or nominal and profitable

5) AI Domestic - NB-75, FC-600,CC-1200, Debt - $1B.
6) AI International - WB-46, FC-300, CC-1500,Slots, Real Estate Debt -$8.5B (EoI from Indigo)

Hotels
7) HCI - Non core

So if Modi/Jaitley tries to appropriate AI International's debt to other entities, this will end up in Supreme Court. CAG and CBI have to work for years to figure out the exact transactions resulted in debt, and which bucket it should go into.

AI is only good for generating debt, and the Indian government is having trouble selling its own debt abroad to raise funds.

https://www.bloomberg.com/news/articles ... uch-harder

vadodara wrote:

... dtw2hyd calling Ratan Tata names....

Nice try.

Vistara is 3 years old. 16 planes 21 destinations.
Air Asia India is 2 year 6-month-old. 14 planes 16 destinations.

Over same three year period -
AI took delivery of 22x787s, 19xA320s, and 8xATR72s and started numerous new routes.
6E took delivery of CEOs/NEOs at a rate of one every 9 days.

Even TruJet with 4xATR72s serving 14 destinations.

And you are quoting 1932 Puss Moth successful operations, along with "believe me, they are capable". tagline.

Every airline faces slot shortage at Mumbai, not stopped them from growing the network.

unrave wrote:

The proposal above is actually more hare brained than the ones put forth by governments past and present. Why will govt continue to own Air India Express when it has a stated objective of exiting the aviation business completely. Economists of the JNU school of thought have done enough damage to the country.

Well your problem is in your faulty interpretation of what the govt's stated intention is. The govt will need an airline to continue the cash-rotation role that AI plays now. They also will need an airline to serve their domestic & regional policy initiatives. They can either start an airline afresh or retain AIX. Simple! Bhakts of the Modiya school of thought are doing great damage to the country.

vadodara wrote:

Amusing, you calling Ajay Singh and Bhatia/Gangwal cronies.

Well do you know who Ajay Singh is? He worked on Modi's election campaign in 2014. He is also the man who came up with the slogan Ab ki bar....

You could revisit the events around 2014 when SpiceJet(then owned by the Maran's) was overnight denied fuel by Govt oil companies until Ajay Singh bought the stake and magically the same oil cos came around to selling fuel. Must be a coincidence only!

vadodara wrote:

Just curious why you left Naresh Goyal out. Afterall, his sources of financing have been the most dubious.

Naresh Goyal has been investigated for his alleged funding in Vajpayee's time as PM. Gulf Air and Kuwait Airway's were among the airlines who provided funding for Jet Airways in the nascent stage. Is it Dawood's money? It has been investigated before! Investigate again!

Speaking of funding sources - who is funding the Bhatia/Gangwal's (Indigo) or Ajay Singh(SpiceJet)? All those aircraft purchases backed by shady leasing companies based in Isle of Mann & Macau - who is behind them? I am all for investigating the whole lot - much better than playing the whataboutery game no?

vadodara wrote:

At anyrate, what should the govt.s job be?

Govt's job is to set policy and govern. Perhaps its time Modi focussed on that rather than PR campaigns & speeches?

PPVRA wrote:

I can't tell if there's a lot of love for AI or not because I'm not too familiar with Indian aviation, but I can share a tale from Brazil (where I'm from) that may apply here. . .

VARIG was an iconic Brazilian airline. One of the oldest airlines in the world by the time it finally went bankrupt. This airline was beloved by the whole country and a symbol of national pride. My username, PP-VRA, was the tail number of VARIG's first 777.

Around the time VARIG was practically bankrupt but still operating, there were a number of other players who were in a similar boat--

VASP
TransBrasil
Other smaller players

All "classic" brands in Brazil. Today, all of the above and many smaller ones are gone. It was painful to see all them go, especially VARIG. But this has lead to a rebirth of aviation in Brazil, with much stronger players, much more growth and a much brighter future.

My advice is don't get attached to brands. The future is much more important than the past, so don't let zombies sacrifice it. We got lucky in Brazil that our government didn't step in to save those airlines. We started again with a clean slate and we're much better off for it.

The Union should at least have paid what was owed to VARIG. Indeed RG was a terrible case of internal corruption and suffered from some VERY bad decisions, but I like to think that a good clean up could have made it fit for the 21st Century, RG had bones for that. I wouldn't say the same about the others like VASP and Transbrasil; VASP was a financial mess kept by Sao Paolo's corrupt government until it was privatised -badly btw- and it was a miracle how it survived for so long, Transbrasil was a badly managed family company where hubris was the key factor when taking business decisions. Brazil's government owed money to RG and also had lots of extra money to help it, they didn't do it for political reasons and not because it was the "right thing to do".

dtw2hyd wrote:

Vistara is 3 years old. 16 planes 21 destinations.
Air Asia India is 2 year 6-month-old. 14 planes 16 destinations.

IndiGo started ops in 2006. Its fleet size and network in 2009 wasn't much different to Vistara and AAI currently. It is grossly unfair to compare the growth of a start up airline to that of a well established airline.

BawliBooch wrote:

The govt will need an airline to continue the cash-rotation role that AI plays now. They also will need an airline to serve their domestic & regional policy initiatives.

Got any sources for that?

readytotaxi wrote:

AI is only good for generating debt, and the Indian government is having trouble selling its own debt abroad to raise funds.

https://www.bloomberg.com/news/articles ... uch-harder

That is interesting. If the GoI is having trouble selling debt, that means wasteful endeavors will have to be curbed in. Is depends on how long the GoI needs a lot more money. From your link:
<i> The government will sell 930 billion rupees of bonds in the March quarter, 500 billion rupees more than initially planned. On top of this, states are due to borrow as much as 1.4 trillion rupees, up 17 percent from a year ago.</i>
How does one mis-interpret the amount needed by over a factor of two? Math says 430 billion rupees was the plan and they needed to sell 930 billion?!?
Is the states debt manageable?

With interest rates expected to go up globally, that will mean less money to subsidize AI. So maybe there will actually be a sale of the airline in 2018...

Reading budget reports of india makes me wish everyone just reported in scientific notation. I think in millions(10^6), billions(10^9), and trillions(10^12). Not a budget of 15.15 Lakh (10^5) * crore (10^7), so a budget of 1.515*10^13 with a 3.5% deficit or 5.2*10^11. So why do they over 5 * 10^11 rupees extra in a quarter? Unless I missed a figure, that was a really really bad quarter. Did I drop a digit somewhere?

Air india looses about 3.5 * 10^10 ruppees a year or close enough to 1*10^10 per quarter.

Wow... Air india lost 3*10^11 rupees when this process started and the losses aren't stabilizing in any meaningful amount (e.g., cutting the loss in half per year).

When does it end? The naysayers to privatization, what is the solution? I see 3*10^11 rupees of debt will be absorbed by the Indian government (almost a decade of losses).
https://economictimes.indiatimes.com/in ... 849812.cms

I love how AI can loose 3.84*10^10 rupees but they claim a 1*10^9 operating profit. Gee, why would we suspect money was shifted from operating expenses to fixed expenses.

Ghad... the more I look into the numbers, the more my head wants to explode at the question "Why did India pay for Air India to keep flying so long?"

Lightsaber

I'll bite: Why did India pay for Air India to keep flying so long?

Answer: Complexity for the sake of complexity with a goal of obfuscation. A high art.

unrave wrote:

dtw2hyd wrote:

Vistara is 3 years old. 16 planes 21 destinations.
Air Asia India is 2 year 6-month-old. 14 planes 16 destinations.

IndiGo started ops in 2006. Its fleet size and network in 2009 wasn't much different to Vistara and AAI currently. It is grossly unfair to compare the growth of a start up airline to that of a well established airline.

In 2006 there was no 49% automatic FDI, there was no 100% FDI(with approval) and there was 5/20.

Going back to my money, talent and motive requirements.

Vistara and AAI have local conglomerate as partner.
Both have foreign partners with so-called "talent"
Both are greenfield without any legacy baggage.
Operating in a much-relaxed aviation regime.

Neither Tatas nor SIA/Tony able to pump equity into UK/I5. If they cannot fund such small airlines, how would they fund AI?

I can't maintain my own yard, but I have several great ideas on how to make neighbor's yard look better?

dtw2hyd wrote:

unrave wrote:

Are you really claiming that AI is a well run profitable airline?

It is not, but any reasonable person with below average accounting or elementary math skills will be able to identify exactly where the problem is.

I color coded to make it simple. Of all seven subsidiaries, ONE is the drag on the entire group.

Ground Handling
1) AIATSL - 10000 Employees Debt free and profitable (EoI from Bird group)
2) AI-SATS - Private JV, Debt free and profitable

Engineering
3) AIESL - 4,000 Employees, Debt free, Absolutely profitable. Without GoI control this will become one of largest MROs in the world (EoI from Airworks and Bird Group)

Airlines
4) AI Express - All contract employees, Debt free or nominal and profitable
5) Pawan Hans - Heli-43, 1000 employees, Debt free or nominal and profitable

5) AI Domestic - NB-75, FC-600,CC-1200, Debt - $1B.
6) AI International - WB-46, FC-300, CC-1500,Slots, Real Estate Debt -$8.5B (EoI from Indigo)

Hotels
7) HCI - Non core

So if Modi/Jaitley tries to appropriate AI International's debt to other entities, this will end up in Supreme Court. CAG and CBI have to work for years to figure out the exact transactions resulted in debt, and which bucket it should go into.

But you have to track back over time, and analyse each entities accounts, not that some were previously well documented.

Yes, international loses money, those profitable entities are virtually debt free now, their debt ultimately ended up with international, debt was parked with international because it was/is seen as the 'safest' entity (least likely to be messed with by politicians, strategic asset).

The wrong end of the election cycle for dramatic change at a major employer, which suggests a very 'soft' deal will be done, or it won't happen by June.

Planesmart wrote:

But you have to track back over time, and analyse each entities accounts, not that some were previously well documented.

Yes, international loses money, those profitable entities are virtually debt free now, their debt ultimately ended up with international, debt was parked with international because it was/is seen as the 'safest' entity (least likely to be messed with by politicians, strategic asset).

The wrong end of the election cycle for dramatic change at a major employer, which suggests a very 'soft' deal will be done, or it won't happen by June.

AI(International) and IA(Domestic) together had $100M debt in 2006.

All this s^&* happened because AI(International) a tiny 10 plane airline, went and purchased 50 widebodies without any plan. No crew, no training facilities, no support infrastructure, zippo. Just to give an example they didn't even have a logistics contract to transport GE90/GEnX engines.

By that time all this is built without any equity infusion from the owner, working capital debt raised to $6B dollars on top aircraft related debt.

IA(Domestic) was a fully established A320 operator and still operating the same type.

Why would other entities accept AI(Int)'s debt? They suffered last 10 years. Hence they want international to be demerged and sent back to Mumbai. Take your 46 WBs, support infrastructure, 1800 employees, Premium Slots, Real Estate, and all the debt came with it.

Close to $900M of its $3.2B annual revenue goes towards debt servicing. ~$700Million to a handful of Indian Public Sector Banks. Without this annual revenue inflow, they will collapse.

AI is government's money circulation scheme, the first batch of private airlines were money laundering schemes, the latest batch of private airlines are duds with drama. That is Indian aviation.

Air India privatisation: India to split airline into four companies
The core airline business comprising Air India and Air India Express will be offered as one company, and the process will be completed by the end of 2018, junior aviation minister Jayant Sinha says

http://www.livemint.com/Companies/0RG5t ... ur-co.html

I can only hope this privatization is successful.....Air India needs better management and being government owned and manage is hindering progress.....

I'm very curious if AI, when sold, will stay *A or move to another alliance... Obviously dependent upon the buyer.

unrave wrote:

Air India privatisation: India to split airline into four companies
The core airline business comprising Air India and Air India Express will be offered as one company, and the process will be completed by the end of 2018, junior aviation minister Jayant Sinha says

http://www.livemint.com/Companies/0RG5t ... ur-co.html

That link is very explicit in the process. What I found interesting:
Consulting firm CAPA Centre for Aviation said in a note on Wednesday that it expects “significant interest from foreign airlines” as also “4-6 serious bids for AI subject to bid conditions”.

That implies the debt relief and restructured re-organization is much better done than prior. This is very good news.

CAPA would have looked into it more than myself. I really wonder on who the bidding groups might be. 3 obvious candidates, who are the 4th thru 6th?

Lightsaber

I have long found the airline industry in India fascinating. It's like a fantastic, never ending soap opera. I doubt many people not from India could begin to fathom the complexities and subtleties of the inner workings and infinite layers of intrigue and politics which go hand in hand with anything airline related in India.

I certainly can't...but it does make for entertaining reading. Just when I think I have a basic understanding...I end up hopelessly lost...yet I can't stop reading.

Keep it coming.

What's new?

Air Asia won't bid: https://economictimes.indiatimes.com/in ... 528301.cms
Singapore airlines hasn't committed either way: http://www.straitstimes.com/singapore/t ... -air-india
Concerns on the size of the workforce for bidders: http://www.moneycontrol.com/news/busine ... 86243.html
That is 210 employees per plane vs. Jet 119 and Indigo 80 (this is when contract labor is added in).
I agree with Chakraborty adds that it’s inevitable that the Government has to find a way. “It has to do, what it has to do. No longer can it kick the can down the road.”


Watching this and Alitalia is like watching a pair of sleeping dogs and calling it a race.

Lightsaber

If you read that ST article, you'll notice that SIA has not ruled out a bid. That's the most optimistic statement of the lot and I guess they will be looking to bid if the terms are favourable.

lightsaber wrote:

What's new?

Air Asia won't bid: https://economictimes.indiatimes.com/in ... 528301.cms
Singapore airlines hasn't committed either way: http://www.straitstimes.com/singapore/t ... -air-india
Concerns on the size of the workforce for bidders: http://www.moneycontrol.com/news/busine ... 86243.html
That is 210 employees per plane vs. Jet 119 and Indigo 80 (this is when contract labor is added in).
I agree with Chakraborty adds that it’s inevitable that the Government has to find a way. “It has to do, what it has to do. No longer can it kick the can down the road.”


Watching this and Alitalia is like watching a pair of sleeping dogs and calling it a race.

Lightsaber

Always has been! Govt can make this an asset sale followed by termination of surplus employees.

No buyers will want most of the employees except for some 777 pilots, engineering staff, and ground handling.

vadodara wrote:

lightsaber wrote:

What's new?

Air Asia won't bid: https://economictimes.indiatimes.com/in ... 528301.cms
Singapore airlines hasn't committed either way: http://www.straitstimes.com/singapore/t ... -air-india
Concerns on the size of the workforce for bidders: http://www.moneycontrol.com/news/busine ... 86243.html
That is 210 employees per plane vs. Jet 119 and Indigo 80 (this is when contract labor is added in).
I agree with Chakraborty adds that it’s inevitable that the Government has to find a way. “It has to do, what it has to do. No longer can it kick the can down the road.”


Watching this and Alitalia is like watching a pair of sleeping dogs and calling it a race.

Lightsaber

Always has been! Govt can make this an asset sale followed by termination of surplus employees.

No buyers will want most of the employees except for some 777 pilots, engineering staff, and ground handling.

LOL, typical a.net spin quoting mathematically/statistically challenged Indian media reports.

29,000 is wrong even with all contract employees.
6E has more employees per plane than AI.
AI Groundhandling unit handles ~30,000 flights for foreign carries apart from ~76,000 AI flights. Also, AI ground handling employee probably makes $250/Month, lowest in the world. One-third of what ME3 pays.
AIESL has mx contracts with 30 foreign carriers.

If you can comprehend post #54, units with most employees are profitable and already have suitor(s). GoI can sell them today.

GoI, and it's consultants are appropriating every debt line item to 8 buckets, AIATSL, AIESL, AI(Dom+Int), AI Express, AI Regional, Pawan Hans, HCI, and SPV.

If AI took $$Millions of loan to train AI(Int) 787 pilots, and GoI tries to appropriate that debt and compounded interest to other units, they will show middle finger. Same with $$Millions to buy 787 simulators, $$Millions setup 787 IT infrastructure, list goes on and on.

So debt has to be shared between AI(Int) or Modi Friends Special Purpose Vehicle.

As #54 shows, most of the debt is associated with 1,800 777/787 crew.

dtw2hyd wrote:

vadodara wrote:

lightsaber wrote:

What's new?

Air Asia won't bid: https://economictimes.indiatimes.com/in ... 528301.cms
Singapore airlines hasn't committed either way: http://www.straitstimes.com/singapore/t ... -air-india
Concerns on the size of the workforce for bidders: http://www.moneycontrol.com/news/busine ... 86243.html
That is 210 employees per plane vs. Jet 119 and Indigo 80 (this is when contract labor is added in).
I agree with Chakraborty adds that it’s inevitable that the Government has to find a way. “It has to do, what it has to do. No longer can it kick the can down the road.”


Watching this and Alitalia is like watching a pair of sleeping dogs and calling it a race.

Lightsaber

Always has been! Govt can make this an asset sale followed by termination of surplus employees.

No buyers will want most of the employees except for some 777 pilots, engineering staff, and ground handling.

LOL, typical a.net spin quoting mathematically/statistically challenged Indian media reports.

29,000 is wrong even with all contract employees.
6E has more employees per plane than AI.
AI Groundhandling unit handles ~30,000 flights for foreign carries apart from ~76,000 AI flights. Also, AI ground handling employee probably makes $250/Month, lowest in the world. One-third of what ME3 pays.
AIESL has mx contracts with 30 foreign carriers.

If you can comprehend post #54, units with most employees are profitable and already have suitor(s). GoI can sell them today.

GoI, and it's consultants are appropriating every debt line item to 8 buckets, AIATSL, AIESL, AI(Dom+Int), AI Express, AI Regional, Pawan Hans, HCI, and SPV.

If AI took $$Millions of loan to train AI(Int) 787 pilots, and GoI tries to appropriate that debt and compounded interest to other units, they will show middle finger. Same with $$Millions to buy 787 simulators, $$Millions setup 787 IT infrastructure, list goes on and on.

So debt has to be shared between AI(Int) or Modi Friends Special Purpose Vehicle.

As #54 shows, most of the debt is associated with 1,800 777/787 crew.

If the numbers are wrong, bidders will adjust accordingly. Bidders do not want the ground handling, so that will be another bidder.


How the GoI wants to allocate debt is irrelevant. This is an auction. If the conditions are stupid, no bid as per Air Asia.

Since the rebid, I'm not aware of anyone committing to bid.

As I posted before, the GoI must watch out for it's bond rating. It looks like we are about on track for February bid packages as per my OP post.

If my numbers are wrong on employees per aircraft, bidders will take on more debt. If too high, they will bid on what employees they accept.

Could this drag out longer? Sure. How many hospitals and schools does the GoI want to skip building? AI is sucking money. Since every group blames the others, end the finger pointing by splitting up the company and seeing what the bids are.

India has no need of Air India anymore from an airline perspective. If a bank bailout is needed, that is better than what I've been reading.

What I'm waiting for is India to get into a trade spat with... anyone. The subsidies of AI do not meet international law. It is time to end the charade. It is a corrupt and expensive charade.

The market abhors a vacuum. With a global widebody glut, new lift would be in place within six weeks. AI's 787s would soon fly with someone else. The NEOs too as well as not too much later the 77Ws.

If they cannot sell AI in February or March, it is time to schedule the shutdown. Say ground 10% of the aircraft per month. With Indigo, GoAir, SpiceJet, Jet/EY, Vistara, and AirAsia, India has grown up.

Seriously, Western, Eastern, PanAm, Northwest, USAir,
Continental, Virgin America, and numerous non-majors are gone. Since AI couldn't adapt, it it past time to pretend.

If you have an idea on how to cleave off a viable, no more subsidies AI, suggest it. The only viable way is to dump the problem on an existing corporation.

For the reason AI won't be given debt forgiveness is it would just be another Alitalia. It must be able to succeed or fail without the government being at fault.

Lightsaber

lightsaber wrote:

India has no need of Air India anymore from an airline perspective. If a bank bailout is needed, that is better than what I've been reading.
Lightsaber

India definitely has no need for a national airline or debt associated with it.

All I am saying don't nationalize AI debt when there are several critical projects are pending lack of funds, particularly in the irrigation sector.

Indian Government is broke but he is spending $17Billion (estimated to repay $34Billion) on 300-mile high-speed-rail, on a route which has a current load factor of 50%. Even 12x Code F airports and a shuttle fleet of A380s would cost less.

What I learnt from recent Gujarat elections, Modi goes for handful highly visible high-value showcase projects while neglecting most the state as Chief Minister and most of the country as PM.

dtw2hyd wrote:

lightsaber wrote:

India has no need of Air India anymore from an airline perspective. If a bank bailout is needed, that is better than what I've been reading.
Lightsaber

India definitely has no need for a national airline or debt associated with it.

All I am saying don't nationalize AI debt when there are several critical projects are pending lack of funds, particularly in the irrigation sector.

Indian Government is broke but he is spending $17Billion (estimated to repay $34Billion) on 300-mile high-speed-rail, on a route which has a current load factor of 50%. Even 12x Code F airports and a shuttle fleet of A380s would cost less.

What I learnt from recent Gujarat elections, Modi goes for handful highly visible high-value showcase projects while neglecting most the state as Chief Minister and most of the country as PM.

Per my understanding, the GoI guaranteed the AI debt, so it has already been nationalized.


At this point, the GoI is stuck. Obviously they should walk away from whatever debt they can in this bankruptcy. But that is what this is, a bankruptcy. How we got here is irrelevant.

The creditor committee has determined a split up of Air India recovers the most.

As per links I posted before in this thread, the longer this drags out, the more debt the GoI must assume.

It has been over a decade since AI could borrow on the open market. Only US import/export loans, secured by the aircraft, wouldn't be co-signed. So the buyer could get out of the 788s and 77Ws if they chose. Except for the latest... Those were under weird financing... The GoI is stuck with the 2017 delivery debt.

Lightsaber

lightsaber wrote:

Per my understanding, the GoI guaranteed the AI debt, so it has already been nationalized.

Very little is guaranteed. on 787 leases GoI guarantees only $5M each, ie., to cover lease-end condition penalties if any. Most NBs are on dry lease/PBTH. Only 777s are financed.

Real estate is collateral on most of the working capital debt. No GoI guarantee.

lightsaber wrote:

At this point, the GoI is stuck. Obviously they should walk away from whatever debt they can in this bankruptcy. But that is what this is, a bankruptcy. How we got here is irrelevant.

Why? Training 300 787/777 pilots and 1500 cabin crew is not free, setting up entire support infrastructure is not free. If Indigo wants to get into WB operations they have to do it from scratch.

lightsaber wrote:

The creditor committee has determined a split up of Air India recovers the most.

Another misleading report by Indian Media. All are separate legal entities since 2009 or so. GoI is splitting the debt, not entities.

lightsaber wrote:

As per links I posted before in this thread, the longer this drags out, the more debt the GoI must assume.

Indigo gave expressed interest in Ai(Int) on Day 2. Qatar showed interest but pushed away by GoI.

AirWorks Engineering, Bird Group, Menzies and Turkey company expressed interest in Groundhandling and/or AIESL.

It is GoI dragging their feet.

lightsaber wrote:

What I'm waiting for is India to get into a trade spat with... anyone. The subsidies of AI do not meet international law. It is time to end the charade. It is a corrupt and expensive charade.

What international treaty does subsidizing Air India violate? If this was in Europe one might talk about EU rules .. but it's not.

dtw2hyd wrote:

Very little is guaranteed. on 787 leases GoI guarantees only $5M each, ie., to cover lease-end condition penalties if any. Most NBs are on dry lease/PBTH. Only 777s are financed.

Real estate is collateral on most of the working capital debt. No GoI guarantee.

It is GoI dragging their feet.

I can assure you financiers consider there is explicit and / or implied sovereign debt when lending to any related Air India party.

There are inter-related transactions, agreements and guarantees, to make the mix even more interesting.

EXIM pricing reflects sovereign debt/guarantees.

Not feet dragging, just trying to make sure disposals occur simultaneously, and no guarantees and calls are triggered, resulting in the Government incurring all the costs / gaining no benefits.

Great for advisory, consultancy, finance and legal 2018 cash flows.

Planesmart wrote:

I can assure you financiers consider there is explicit and / or implied sovereign debt when lending to any related Air India party.

There are inter-related transactions, agreements and guarantees, to make the mix even more interesting.

EXIM pricing reflects sovereign debt/guarantees.

Not feet dragging, just trying to make sure disposals occur simultaneously, and no guarantees and calls are triggered, resulting in the Government incurring all the costs / gaining no benefits.

Great for advisory, consultancy, finance and legal 2018 cash flows.

You are absolutely correct but implied sovereign guarantees apply to good/serviceable aviation asset debt which buyer is planning to take on, not the bad/unserviceable debt GoI trying to write-off (or) nationalize in one go.

This debt is held by few public sector banks, how does a writeoff work in such a convoluted setup
Is GoI going to pay PSU Banks from 2018 federal budget?
Is GoI going to ask PSU Banks to take a write-off as bad debt?

In any case, it will be a onetime $6B charge and an annual loss of $700M. Indian Banks may have skipped 2008 GFC but 2018 will be interesting.

dtw2hyd wrote:

lightsaber wrote:

India has no need of Air India anymore from an airline perspective. If a bank bailout is needed, that is better than what I've been reading.
Lightsaber

What I learnt from recent Gujarat elections, Modi goes for handful highly visible high-value showcase projects while neglecting most the state as Chief Minister and most of the country as PM.

So basically bailing out the overworked Air India employees equates to spreading the wealth around?

vadodara wrote:

dtw2hyd wrote:

lightsaber wrote:

India has no need of Air India anymore from an airline perspective. If a bank bailout is needed, that is better than what I've been reading.
Lightsaber

What I learnt from recent Gujarat elections, Modi goes for handful highly visible high-value showcase projects while neglecting most the state as Chief Minister and most of the country as PM.

So basically bailing out the overworked Air India employees equates to spreading the wealth around?

The bailout money is used to cover the gap in debt servicing cost. Follow the money. GoI -> AI -> GoI owned Banks.

What do shareholders do when management is not able to restructure debt and emotions and unions are involved. Do the same. Give it to private equity.

They will fire all unnecessary workforce in one day if these floated theories are correct.

Jaitley who flunked Economics 101 is leading this task because no sane person can justify nationalizing $6.5B debt and still keep 49% in all AI entities with a smiley face.

dtw2hyd wrote:

vadodara wrote:

dtw2hyd wrote:

What I learnt from recent Gujarat elections, Modi goes for handful highly visible high-value showcase projects while neglecting most the state as Chief Minister and most of the country as PM.

So basically bailing out the overworked Air India employees equates to spreading the wealth around?

The bailout money is used to cover the gap in debt servicing cost. Follow the money. GoI -> AI -> GoI owned Banks.

Jaitley who flunked Economics 101 is leading this task because no sane person can justify nationalizing $6.5B debt and still keep 49% in all AI entities with a smiley face.

A highly intellectually dishonest answer.

It appears that one part why AI is in the dumps is because it has been settled with an unproductive workforce is not the issue. GOI would not have bailed AI out but to buy industrial peace. It did not hurt that the neta's also liked their freebies.

Other than than, Jaitley has so far looked very good. GST has eased the flow of trade and business. Gujarat elections went to prove that even traders, who otherwise were hurt by GST/notebandi, voted for vision.

The only guys who voted against are the ones looking for freebies, bailouts, reservations and so on. Seems like you are an esteemed member of that gang.

Enough said.

vadodara wrote:

.... Seems like you are an esteemed member of that gang.

Enough said.

Well, you cannot cover up your lack of understanding of aviation financing by repeatedly calling me an AI employee. I know it is a standard WhatsApp University technique, doesn't work on international forums.

BTW, shouldn't you be busy blocking some movie release in India?

Who'd wanna buy it ??

F27500 wrote:

Who'd wanna buy it ??

So far, on the list of interested parties we have:
Indigo
Singapore Airlines (through Tata)
Qatar Airways

On the other hand, Air Asia has publicly denied any interest.

Any other Middle Eastern carriers might be interested? There is certainly one that I hope is interested and which would allow Air India to remain in Star Alliance, but sadly, no indication of interest from the said party yet.

An International Airline is interested in buying Air India's Foreign Operations.

http://www.news18.com/news/business/uni ... 43463.html

I have no link, but I have a gut feeling the sale will be delayed. I wonder how much the delay will cost the GoI.

Planesmart wrote:

I can assure you financiers consider there is explicit and / or implied sovereign debt when lending to any related Air India party.

There are inter-related transactions, agreements and guarantees, to make the mix even more interesting.

EXIM pricing reflects sovereign debt/guarantees.

Not feet dragging, just trying to make sure disposals occur simultaneously, and no guarantees and calls are triggered, resulting in the Government incurring all the costs / gaining no benefits.

Great for advisory, consultancy, finance and legal 2018 cash flows.

That is what I recall from every Air India borrowing. If there isn't a guarantee, we would hear about a reorganizational bankruptcy.

COKMCI wrote:

An International Airline is interested in buying Air India's Foreign Operations.

http://www.news18.com/news/business/uni ... 43463.html

What an interesting link:
He also admits that Air India’s debt may, after close scrutiny, come out to be substantially higher than the popularly believed Rs 50,000 crore sum. What?!?

Right now there has been several interested parties in the international (foreign) airline portion, but India wants to sell with the domestic portion. I do not think the combination is viable.

kitplane01 wrote:

lightsaber wrote:

What I'm waiting for is India to get into a trade spat with... anyone. The subsidies of AI do not meet international law. It is time to end the charade. It is a corrupt and expensive charade.

What international treaty does subsidizing Air India violate? If this was in Europe one might talk about EU rules .. but it's not.

What bilateral doesn't prohibit subsidies? WTO specifically prohibits it. Any nation may impose tariffs if they can prove subsidy. There is a reason DL and other accuse the ME3 of receiving subsidies if proven (or just believed enough), tariffs could be imposed.

Here is a WTO ruling against Europe on airlines: https://www.washingtonpost.com/news/won ... 6bf7838890

Lightsaber

If I have to guess, the Indian government is planning to use upcoming FRDI(Financial Resolution and Deposit Insurance) bill to privatize AI.

Don't get fooled by words "Deposit Insurance", it does exactly opposite to FDIC. Under this law, banks can "bail-in" bad debts by converting other deposits as bank shares without depositor's approval.

To give an example, if you have deposit in a bank where Vijay Mallya has bad debt, the bank will confiscate your deposit and issue bank shares to cover VM's bad debt. The plan is to use FRDI "bail-in" all bad debts. A nefarious way to improve bank asset quality.

Some critics are saying demonetization was small potatoes compared to FRDI.

lightsaber wrote:

Right now there has been several interested parties in the international (foreign) airline portion, but India wants to sell with the domestic portion. I do not think the combination is viable.

I am a little confused. I thought one of the reasons the AI international flights were doing comparatively well (compared to 10 years ago when most of the flights flew empty) were the connections from the other major cities. Wouldn't any buyer of the international portion be interested in those flights? India doesn't have the transit policies to convert Delhi/Mumbai into a Kangaroo route transfer hub, so without domestic connections, how would the international ops have any hope of profitability?

As for the rest of the the domestic network, other than the potentially profitable DEL-BOM shuttle, the rest of it is a paper tiger. Let's take BLR as an example. From DGCA traffic reports, we find that the top 5 origin/destinations from BLR are:

1. DEL
2. BOM
3. HYD
4. CCU
5. PNQ

DEL has about 9 daily flights, BOM 4. HYD barely has 2 (arguably India's second largest IT hub), CCU has 2 daily flights and PNQ (another top 5 IT hub in India) has none. This is for a major city in India with a large population of people with enough disposable income to fly domestically, and potentially J class traffic. Averaging over December 2017, BLR-HYD city pair had 3099 PDEW, BLR-CCU 2537 PDEW and BLR-PNQ 2316. At 180 passengers per A320, that is 17 round trip flights between BLR-HYD, 14 round trip flights between BLR-CCU and 12 round trip flights between BLR-PNQ.

How many does 6E have? Apart from PNQ, which is a civil enclave (still 4 daily non-stops), 6E operates shuttle type operations between the city pairs (13 BLR-HYD non-stops and 10 BLR-CCU non-stops). AI has effectlively withdrawn from the domestic point-to-point market and is only focusing on connections to DEL and the DEL-BOM shuttle. I do not know much about airline management, but I'd imagine it would be probably 6-9 months for a competent management to wrap up AI's domestic network outside the core two markets. So why would a any serious investor, willing to look past the debt on the books, and potential industrial strife, think twice about an effectively non-existent domestic network?

devmapper wrote:

..... I do not know much about airline management, but I'd imagine it would be probably 6-9 months for a competent management to wrap up AI's domestic network outside the core two markets. So why would a any serious investor, willing to look past the debt on the books, and potential industrial strife, think twice about an effectively non-existent domestic network?

AI lost domestic market share because it still has the same number of narrowbodies as it had in 2006. A dozen of them were 1989 delivered double bogies, an operational nightmare.

With recent A320SL/NEO replacements, things are getting little better.

It is like you(Domestic) ride an old scooter(A320s) but your brother(international) drives a luxury car(777/787s) and you have to pay for his monthly payments, gas, and insurance from your hard earned salary because you are part of one big family.

On top, everyone calls you a slacker. That is the situation AI(Domestic) is in.

This is going to be a real sticking point when splitting the debt between Dom and Int. AI(Domestic) will fight as a payback for their suffering. So GoI taking the easy route by combining them.

devmapper wrote:

lightsaber wrote:

Right now there has been several interested parties in the international (foreign) airline portion, but India wants to sell with the domestic portion. I do not think the combination is viable.

I am a little confused. I thought one of the reasons the AI international flights were doing comparatively well (compared to 10 years ago when most of the flights flew empty) were the connections from the other major cities. Wouldn't any buyer of the international portion be interested in those flights? India doesn't have the transit policies to convert Delhi/Mumbai into a Kangaroo route transfer hub, so without domestic connections, how would the international ops have any hope of profitability?

There would be domestic connections, but with the buyer's domestic fleet. The issue is AI's domestic fleet just costs too much to do the same thing. For example, Indigo buying the international operations would instantly have huge connectivity.

And why hasn't India put in places to be a transfer hub for international to international? Why aren't passengers from Melbourne and Sydney flying onward to London and various other cities in not on Europe, but the mid-East? While at it, connect Europe to a few other regional cities (KUL, CGK, BKK, and SIN to start). That would allow a few more Europe routes on 788s. Then there would be one or two more cities in Australia and certainly more frequency to SYD and MEL and so on and so on.

Instead, the connections are forced out of India, what I cannot understand is why so much business is pushed out of the country by bad policy. Instead, that traffic goes to EK. Why does India want to ensure EK thrives? There are two ways to defeat the ME3:
1. Provide better connections than they do.
2. Bypass them.

By just connecting already existing traffic, India air traffic would grow quickly.

Eh, probably won't change. EK thanks you and whomever argues against the change.

Lightsaber

Air India’s debt could be 40% higher than estimated, says Ashok Gajapathi Raju.
http://www.livemint.com/Companies/fKqit ... ys-As.html

lightsaber wrote:

devmapper wrote:

lightsaber wrote:

Right now there has been several interested parties in the international (foreign) airline portion, but India wants to sell with the domestic portion. I do not think the combination is viable.

I am a little confused. I thought one of the reasons the AI international flights were doing comparatively well (compared to 10 years ago when most of the flights flew empty) were the connections from the other major cities. Wouldn't any buyer of the international portion be interested in those flights? India doesn't have the transit policies to convert Delhi/Mumbai into a Kangaroo route transfer hub, so without domestic connections, how would the international ops have any hope of profitability?

There would be domestic connections, but with the buyer's domestic fleet. The issue is AI's domestic fleet just costs too much to do the same thing. For example, Indigo buying the international operations would instantly have huge connectivity.

And why hasn't India put in places to be a transfer hub for international to international? Why aren't passengers from Melbourne and Sydney flying onward to London and various other cities in not on Europe, but the mid-East? While at it, connect Europe to a few other regional cities (KUL, CGK, BKK, and SIN to start). That would allow a few more Europe routes on 788s. Then there would be one or two more cities in Australia and certainly more frequency to SYD and MEL and so on and so on.

Instead, the connections are forced out of India, what I cannot understand is why so much business is pushed out of the country by bad policy. Instead, that traffic goes to EK. Why does India want to ensure EK thrives? There are two ways to defeat the ME3:
1. Provide better connections than they do.
2. Bypass them.

By just connecting already existing traffic, India air traffic would grow quickly.

Eh, probably won't change. EK thanks you and whomever argues against the change.

Lightsaber

IKR
Indians are so silly
they could take down EK/QR in a flash if they had common sense policy- got rid of their stupidly high ATF fees, and had a free flow transfer policy...

yet the whine about restricting rights to EK or the fact that EK etc has way more flights than anyone local.

This thought process is typical of India though- so much potential wasted because of bureaucracy

Kashmon wrote:

lightsaber wrote:

devmapper wrote:

I am a little confused. I thought one of the reasons the AI international flights were doing comparatively well (compared to 10 years ago when most of the flights flew empty) were the connections from the other major cities. Wouldn't any buyer of the international portion be interested in those flights? India doesn't have the transit policies to convert Delhi/Mumbai into a Kangaroo route transfer hub, so without domestic connections, how would the international ops have any hope of profitability?

There would be domestic connections, but with the buyer's domestic fleet. The issue is AI's domestic fleet just costs too much to do the same thing. For example, Indigo buying the international operations would instantly have huge connectivity.

And why hasn't India put in places to be a transfer hub for international to international? Why aren't passengers from Melbourne and Sydney flying onward to London and various other cities in not on Europe, but the mid-East? While at it, connect Europe to a few other regional cities (KUL, CGK, BKK, and SIN to start). That would allow a few more Europe routes on 788s. Then there would be one or two more cities in Australia and certainly more frequency to SYD and MEL and so on and so on.

Instead, the connections are forced out of India, what I cannot understand is why so much business is pushed out of the country by bad policy. Instead, that traffic goes to EK. Why does India want to ensure EK thrives? There are two ways to defeat the ME3:
1. Provide better connections than they do.
2. Bypass them.

By just connecting already existing traffic, India air traffic would grow quickly.

Eh, probably won't change. EK thanks you and whomever argues against the change.

Lightsaber

IKR
Indians are so silly
they could take down EK/QR in a flash if they had common sense policy- got rid of their stupidly high ATF fees, and had a free flow transfer policy...

yet the whine about restricting rights to EK or the fact that EK etc has way more flights than anyone local.

This thought process is typical of India though- so much potential wasted because of bureaucracy

I personally would love if India gets rid of the stupid rules on International to International transfer. It serves no one other than ornery bureaucrats who have no clue about what constitutes a security risk and would rather cover their backside than think and make a rational decision. Combined with extending E-visas to provide Visa-on-Arrivals, this would probably transform the tourism industry in India.

However, that does not answer my original question. Let's assume Indigo is ready to put in a serious bid, even after taking into consideration the usurious interest rates charged by banks to borrow money, and the potential for industrial action by employees. Compared to the risk and challenges already present, would it be that difficult for them to fold AI Domestic into their LCC? They'd have a huge advantage in the DEL-BOM shuttle market due to the additional slots AI Domestic would bring to them, and that alone might be well worth the additional money 6E might have to pay to acquire both the domestic as well as the international routes.

Besides, I am not 100% sure that AI domestic will completely go away. I'd imagine there's be a small market for paying J class passengers that 6E wouldn't want 9W to pick up. The new CFM powered A320Neos would be a welcome backup for the GTF engined A320neos 6E has had problems with in the recent past. I don't know if 6E is on any GDS, but AI is on Sabre, and they'd probably want to retain it as well. Note, I am not advocating for AI domestic, but pointing out that the miniscule domestic operations and the potential benefits it brings are hardly showstoppers for the targeted investors.

Kashmon wrote:

IKR
Indians are so silly
they could take down EK/QR in a flash if they had common sense policy- got rid of their stupidly high ATF fees, and had a free flow transfer policy...

yet the whine about restricting rights to EK or the fact that EK etc has way more flights than anyone local.

This thought process is typical of India though- so much potential wasted because of bureaucracy

Are you trying to upstage 20 years Bollywood drama with a simple fix? That's not how a democracy works.

Though for AI, allowing foreign banks to lend working capital loans is the silver bullet. It will open floodgates and even other carriers will benefit.

Even at 7% APR, it will be a win-win for both a foreign bank and AI, which is paying 15% on average now.

GoI wants competition in aviation but not in the banking sector.

sand26391 wrote:

Air India’s debt could be 40% higher than estimated, says Ashok Gajapathi Raju.
http://www.livemint.com/Companies/fKqit ... ys-As.html

Some people here have argued that Air India was run in a reasonable fashion by a reasonable management, but had been forced into a bad position by the government of India and banks controlled by them.

If Air India does not even know how much debt they have ... then this is false. This is a very clear indication of bad management.

devmapper wrote:

However, that does not answer my original question. Let's assume Indigo is ready to put in a serious bid, even after taking into consideration the usurious interest rates charged by banks to borrow money, and the potential for industrial action by employees. Compared to the risk and challenges already present, would it be that difficult for them to fold AI Domestic into their LCC?

Air India domestic is a financial black hole. It's a disaster. It's toxic. No one can reform it (says decades of history) and the unions don't want to give back (says the unions) and the government wouldn't let you make the necessary changes (says the government every time someone tries to make big changes).

To think you can make domestic Air India healthy you must also think you are going to do a better job that all the other reformers that have come and failed before you, and that you can overcome all the obstacles that they could not.

kitplane01 wrote:

...
If Air India does not even know how much debt they have ... then this is false. This is a very clear indication of bad management.

GoI know the reason why debt went up because they are the reason.

They took $1.5B loans in last six months, ie., after privatization process started.
And they add few more $$Billions. It is a known tactic to kill the prospectus of sale.

Also, Mr.Raju, current MoCA is not going to be there for long. Their alliance is falling apart. Raju's party TDP called Modi's party BJP a popsicle stick. Shows the significance of BJP.

kitplane01 wrote:

Air India domestic is a financial black hole. It's a disaster. It's toxic. No one can reform it (says decades of history) and the unions don't want to give back (says the unions) and the government wouldn't let you make the necessary changes (says the government every time someone tries to make big changes).

To think you can make domestic Air India healthy you must also think you are going to do a better job that all the other reformers that have come and failed before you, and that you can overcome all the obstacles that they could not.

Do you have any evidence to support this claim, other than unfettered support on a.net.

dtw2hyd wrote:

kitplane01 wrote:

Air India domestic is a financial black hole. It's a disaster. It's toxic. No one can reform it (says decades of history) and the unions don't want to give back (says the unions) and the government wouldn't let you make the necessary changes (says the government every time someone tries to make big changes).

To think you can make domestic Air India healthy you must also think you are going to do a better job that all the other reformers that have come and failed before you, and that you can overcome all the obstacles that they could not.

Do you have any evidence to support this claim, other than unfettered support on a.net.

the fact that the Indian government operates it is enough evidence.