lightsaber wrote:

yashk wrote:

unrave wrote:

That blog is not 100% correct though. Some of those planes have been withdrawn from use and a few have flown today. From what I can see 1 A319, 4A321, 2B788 and 5B77W have been grounded, for at least a month, some going back to Mar 18. Hopefully some vested interests are not modifying FR24 data as part of an elaborate PR hatchet job!

Its actually 3 77Ws, the blog has counted 2 of the planes under modification for VVIP transport (VT-ALW and VT-ALV). But yes, I have never understood AI's low utilization of its 777 fleet. They have 16 planes, and they need 2xJFK, 2xORD, 2xEWR, 1xIAD, 3xSFO, 1xJED that still leaves 5 planes not used.

I agree with not counting ViP (government) aircraft. Thank you.

Still.. 15 aircraft down? What is there to order?

There entire widebody strategy has always been poor? When are they going to prioritize international to international connections to help seed flights.
For example, BKK is a very popular destination for Europeans. Why not add it, Bali, and the other SE Asia capitals, and Australia's big cities to defeat the ME3 at the connections game. India has a billion people+ to be connected to the world. An airline with excellent cost control could be one of the top ten airlines in the world pretty quickly if the GoI:
1. Built an airport at a high O&D city with enough surplus gates and runway capacity to allow hub waves.
2. Modified policies and taxes to be more connection friendly.

The taxes on duty free sales alone would make this a huge revenue positive venture. Not to mention the economic boost of all the jobs moving people who are outside of India. This flood of oversses revenue would boost the rupee too.

Lightsaber

TBH Air India provides many Bangkok/Singapore-EU connections. The Dreamliner on the BKK route is timed to connect both ways to their EU timings. AI started a second BKK red eye from DEL on the neo which connects well with the US flights. I doubt Indian govt discourages transit, in DEL/BOM, intl-intl transfer is just like any other airport.

Air India board meets Friday.

https://www.moneycontrol.com/news/busin ... 1.html/amp

It sounds like a substantial change in financial status.


As to my comments on connections, if they are now as easy as the competition, that is good news. If they cost more or are a hassle...

Lightsaber

lightsaber wrote:

Air India board meets Friday.

https://www.moneycontrol.com/news/busin ... 1.html/amp

It sounds like a substantial change in financial status.


As to my comments on connections, if they are now as easy as the competition, that is good news. If they cost more or are a hassle...

Lightsaber

Air India board meets Friday to beg the govt for more tax payer funds

Interesting, the pilot dues weren't paid. Strike is threatened:

https://indianexpress.com/article/busin ... s-5312379/

My take: I'm surprised they separate payment from the salary payment. What else isn't paid? This does not bode well for aircraft leases.

Lightsaber

Air India pilots agree to fly "as much as needed" for Kerala flood relief operations:

https://timesofindia.indiatimes.com/bus ... 454402.cms

It looks like a "bad bank" for non-core opperations is being created:

https://m.timesofindia.com/business/ind ... 492042.cms

The comment about no further investment is a bit scary...

My take, by leaning down AI's headcount (spin off maintenance, ground ops, and this non-core). Less debt... Gives a good structure to sell.

Lightsaber

Good sense prevails: the Finance Ministry has rejected the latest demand of Rs. 300 billion fund infusion by the AI board. Instead the non core assets of the airline and debt will be hived off to an SPV. Hopefully the residual company can then be sold off by 2020. A rare moment of financial responsibility shown by the government while dealing with the national beggar.
https://www.business-standard.com/artic ... 067_1.html

The comment about no further investment is a bit scary...

Why is that scary? That news is sweet music to my ears. Flushing down the toilet is a better use of cash than funding AI.

Air India pays its pilots their flying allowance, averting threatened strikes:

https://timesofindia.indiatimes.com/bus ... 498766.cms

Also, from what I was following on the media, showed exemplary performance in relief efforts during the Kerala floods

unrave wrote:

Good sense prevails: the Finance Ministry has rejected the latest demand of Rs. 300 billion fund infusion by the AI board. Instead the non core assets of the airline and debt will be hived off to an SPV. Hopefully the residual company can then be sold off by 2020. A rare moment of financial responsibility shown by the government while dealing with the national beggar.
https://www.business-standard.com/artic ... 067_1.html

I am very encouraged by the forced/rapid reform.

This is a significant turning point. If that huge amount of money had been handed to AI, it would have been burned away within a year in my opinion. Now, the loans are separated and so are non core operations (jobs) to stop all the distraction. Hopefully the spinoff of maintenance and ground handling still happens.

Air India needs to be reduced down to a manageable chunk and get back to what started this thread: Privatization. IMHO complete Privatization.

unrave wrote:

The comment about no further investment is a bit scary...

Why is that scary? That news is sweet music to my ears. Flushing down the toilet is a better use of cash than funding AI.

I agree not to flush money down the toilet. That doesn't mean, as an aviation enthusiast, that I think Air India is ready to take off the training wheels.
The financial responsibility is a decade past due. Subsidizing Air India has distorted all of Indian aviation and slowed job growth in the nation because of it.
But if I were an Air India employee, I would be scared into allowing reform by those comments.


My comment wasn't for you. It was for the pro AI posters. I believe the change is real.

Lightsaber

unrave wrote:

Good sense prevails: the Finance Ministry has rejected the latest demand of Rs. 300 billion fund infusion by the AI board. Instead the non core assets of the airline and debt will be hived off to an SPV. Hopefully the residual company can then be sold off by 2020. A rare moment of financial responsibility shown by the government while dealing with the national beggar.
https://www.business-standard.com/artic ... 067_1.html

The comment about no further investment is a bit scary...

Why is that scary? That news is sweet music to my ears. Flushing down the toilet is a better use of cash than funding AI.

About time the Finance ministry is questioning what happened to the funds that were provided previously.

Obviously, if Air India is unable to make money during the 'good times', better to mitigate the loss when the times are not so good.

Not all economic sense:
https://m.businesstoday.in/lite/story/a ... 81583.html

My take: a panic grant of 500 crore to keep from being a non-performing asset.

1500 crore emergency loan ..

Banking law allows no grace period for 90 days past due. Banks are penalized for allowing it by being forced to put asside reserves (money they cannot make money on). Since a banking holiday is coming up, this could be dramatic.

It takes only one institution being 90 defaulted on to change the whole discussion. My AI has built a house of cards.

Doesn't the low season continue July-September quarter?

I'm glad employees were paid.
I'm glad reform is being demanded before further payment (the bad bank).

I can see the discussions:
"We need money now!"
"Sign here for immediate reforms as noted in Appendix A through GG"
"No"
"Ok, no. Good day."

When is there a plan?
Seriously, everyone has caught on to the drama tricks.

Time for a detailed public audit.
I realize an election is coming, but perhaps the cost to save AI is too much. Multiple earlier post showed operating losses when false profits we're claimed after audit. That was the good times,?

When privitization was 3 or 4 elements, I had hope. Now? :no:

What next? Farfaster reform is now required due to the bad times.

I predict a 10% chance of aircraft reposession.

Lightsaber
Late edit:

Recall it was July 30th Air India was already past 60 days on unpaid bills.


https://m.economictimes.com/industry/tr ... 194424.cms
So we are at 84+ days (AI was already a few days past due).

It is Thursday. Bills must be paid by Tuesday 8/28, if not by this Friday! (Payments must be before 90 days, there is no weekend grace period).

Does anyone know if 90 days happens this weekend and money must be released tomorrow?

I stand by my previous loss estimates....
Once 60 days past due, all bills must be made current to stop the clock too....

What's next?

Lightsaber

"Air India is very clearly a legacy issue. Air India's debt is unsustainable. Forget Air India, nobody can handle that debt. For any airline to service that debt is not possible," Prabhu told in an interview.

Quote from Prabhu, the aviation minister. He is doing what political situation will allow.

vadodara wrote:

"Air India is very clearly a legacy issue. Air India's debt is unsustainable. Forget Air India, nobody can handle that debt. For any airline to service that debt is not possible," Prabhu told in an interview.

Quote from Prabhu, the aviation minister. He is doing what political situation will allow.

RIP Air India.

https://youtu.be/L0MK7qz13bU?t=64

unrave wrote:

Hopefully some vested interests are not modifying FR24 data as part of an elaborate PR hatchet job!

clearly, and being paid in tea and snacks that too.

Unless a 'bad bank' is supported by legislation, it's creation will trigger covenant breaches on most well written external finance and leases.

Parallel with the bad bank creation, international financiers will be demanding inferred Government guarantees are formalised, whether their funding is inside or outside the new entity.

When AI group funding is fully understood, plus inter-relationships and explicit / inferred guarantees identified, just what percentage of the group will be bad versus good? The Government will likely guarantee ongoing transactions by entities in the bad bank, but not earlier debts, which will trigger services being withheld, attempts to wind up, counter action (like withholding services to entities outside the bad bank, until bad bank entity debt is settled or guaranteed)..........

smartplane wrote:

Unless a 'bad bank' is supported by legislation, it's creation will trigger covenant breaches on most well written external finance and leases.

Parallel with the bad bank creation, international financiers will be demanding inferred Government guarantees are formalised, whether their funding is inside or outside the new entity.

When AI group funding is fully understood, plus inter-relationships and explicit / inferred guarantees identified, just what percentage of the group will be bad versus good? The Government will likely guarantee ongoing transactions by entities in the bad bank, but not earlier debts, which will trigger services being withheld, attempts to wind up, counter action (like withholding services to entities outside the bad bank, until bad bank entity debt is settled or guaranteed)..........

A 'bad bank' will take time. But it has allowed other basket case companies to be turned around. It will be expensive for the GoI.
But cheaper than the alternative.

The largest example was the US resolution trust corporation:
https://www.quora.com/What-are-some-exa ... heir-fates

What needs to be made clear is the good companies are forever on their own. If there are existing guarantees, it will be leases.

The bad bank is used when you give up on the operating company and start cleaving functional parts (often after significant reform) so they stop distracting. Steadily you shrink the bad bank by spinning off units until it is no more than a collection agency and debt.

You made good objections. However, the fact (while not naming they are doing so) that the GoI is taking the approach means there is a solution. It is possible AI might, in some form, keep flying.

We know the current course doesn't work. A subsidized company will always be managed to need that next subsidy.
What has to be done is cleave off the 'good' portions are on their own. There is no interference, but there is also no chance of a future subsidy, only the payoff of debt guarantees post collapse.

The method works, but only if the survivors are healthy enough and small enough to fail on their own.

Lightsaber

smartplane wrote:

Unless a 'bad bank' is supported by legislation, it's creation will trigger covenant breaches on most well written external finance and leases..

Yet another legacy of the socialist system. Transferring the assets will attract heavy 'stamp duty', i.e. transaction tax.

Pushing bad assets into a 'bad bank' is not free either.

980cr from finance ministry likely next week.

https://www.financialexpress.com/infras ... k/1290310/

That is one thirtieth of what was asked . Good on the government for not ceding to the demand. The lefty nuts will throw a tantrum though.

unrave wrote:

Good sense prevails: the Finance Ministry has rejected the latest demand of Rs. 300 billion fund infusion by the AI board. Instead the non core assets of the airline and debt will be hived off to an SPV.

As I understand this is all posturing. It is an election year. The government knows it has to bail out Air India. So what is the best way to do it i.e. while looking the best for voters?

What I have unable to reconcile is the failure of the sale process.

Filter out all the fluff. For government working, the people i.e. bureaucrats and politicians have to be aligned and the environment should allow for the action to be taken and sold to the public.

(A) If we look at the people.
1. The Civil Aviation Secretary was eyeing the Cabinet Secretary position. A successful sale would have almost guaranteed catapulted him in to the job of the highest ranking bureaucrat in the land.
2. The Minister Jayanth Sinha is no fool. And he is a master when it comes to financial services and investment banking. He would have known onerous terms when he saw them.

I.E. No opposition from either the bureaucracy or politicos.

(B) The environment
1. The Tatas were all set to take AI. If you see the time-line, the terms and conditions were modified to suit them.
2. The government, and most especially Civil Aviation ministry, knew/know they need to jettison AI. So does Finance Ministry.
3. At Civil Aviation Ministry it is all UDAN UDAN UDAN now. Jettisoning AI frees up funds and resources for UDAN.

With all these favourables, how were the terms suddenly made so onerous that all the bidders walked away from the offer? Where, when, and why did this tinkering occur? Even the bidders knew, there simply wasn't enough time for a second round which could have driven down valuations, so that is not an option.

What the heck happened behind the scenes?

Any thoughts?

unrave wrote:

That is one thirtieth of what was asked . Good on the government for not ceding to the demand. The lefty nuts will throw a tantrum though.

The remainder will probably follow in due time. Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

globetrotter94 wrote:

unrave wrote:

That is one thirtieth of what was asked . Good on the government for not ceding to the demand. The lefty nuts will throw a tantrum though.

The remainder will probably follow in due time. Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

Correction: Indian taxpayers will ultimately fund this botched enterprise.

globetrotter94 wrote:

The remainder will probably follow in due time. Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

We all want Air India to be disinvested - but there is no "magic pill" as some here seem to be thinking. Closing down Air India will mean the end of Public sector banks which in turn will end up destroying whatever is left of the economy after 4 years of "Acche Din" incompetence!

Air India is NOT going to be disinvested. Nor is it going to be closed down. Not happening.

BawliBooch wrote:

globetrotter94 wrote:

The remainder will probably follow in due time. Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

We all want Air India to be disinvested - but there is no "magic pill" as some here seem to be thinking. Closing down Air India will mean the end of Public sector banks which in turn will end up destroying whatever is left of the economy after 4 years of "Acche Din" incompetence!

Air India is NOT going to be disinvested. Nor is it going to be closed down. Not happening.

Yes, of course. That is my view too. I was just stating facts as I saw them.

unrave wrote:

That is one thirtieth of what was asked . Good on the government for not ceding to the demand. The lefty nuts will throw a tantrum though.

Is this enough to come current with their leases?

Is it enough to get all those expensive aircraft (monthly leases) flying?

To make a profit, airlines must use aircraft or they are paying for use they... aren't using.

Now obviously keeping paid off aircraft for low utilization/high RASM makes sense. But those old aircraft have high variable costs when used, so they had better be low utilization. But paying for aircraft that could be flying... that gets silly.


So will AI receive enough money to continue? Perhaps start maintaining aircraft with normal downtime? I'm not suggesting they'll get up to HA's turn time for a c-check, but a heavy C should take no more than 14 days. The fact aircraft have been grounded for a month+ is a huge issue. For a narrowbody, that is another $150,000 of lease payments made that didn't need to be made. For a widebody, we're looking at close to half a million usd.

But at least the GoI was sensible enough not to throw over a billion and a half USD away.

Lightsaber

globetrotter94 wrote:

Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

Isnt this the problem, a corporation that is part of the govt. Unfortunately, the govt. does not pay. The tax payers do.

vadodara wrote:

globetrotter94 wrote:

Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

Isnt this the problem, a corporation that is part of the govt. Unfortunately, the govt. does not pay. The tax payers do.

For the last decade Air India has been a costly government ministry. It isn't justifiable.

Tax payers have a right to complain when what should be a profit center needs infusions of capital again and again.

Countries on the other side of bilaterals also have a right to complain. Subsidies are specifically prohibited.

Air India lost money during the good times. Right now is only challenging.

I hope everyone realizes how expensive bAir India will become in a downturn.

Have the leasing companies and banks been paid? Banking law is strict for many reasons. I'd like to know if AI is at extreme risk of becoming a non performing asset.

We can stop talking about what the Indian government wants if they let that happen. AI has used up the Goodwill slack in payments. If Wells Fargo violates banking laws, it will cost them more than the loans outstanding to AI. 90 days is a harsh fixed deadline. Have they been paid? Has their Avalon division under struct Hong Kong laws?

No one banks billions of dollars without protections...

Have you read the book "The World is flat.". It goes into how powerful countries (including China and India, and Russia) have been forced to change directions based off international finance. There are also examples of Thailand that apply here.

The Golden Horde clicks their mouse with no remorse... No nation, not even the USA, can invent their own rules anymore. Beware spooking Asia wives. They are infamous for bankrupting nations based on moving money via mouse clicks. They insist on knowing their money is protected by good banking laws.

If you haven't read books by Bernstein and Freedman, you won't understand why this is on topic.

Have you read Wealth of Nations? Adam Smith also gave examples applicable to AI. To conclude, I see no way AI cannot be divested. It is going to get more expensive with time to hold on to.

Lightsaber

vadodara wrote:

globetrotter94 wrote:

Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

Isnt this the problem, a corporation that is part of the govt. Unfortunately, the govt. does not pay. The tax payers do.

Of course, the government raises money from taxpayers.

However, regardless of which side of the political spectrum politicians are voted in, for whatever reason only known to them, they have so far refused to fully divest themselves of this airline. If it truly were a simple matter, and the "waste" of public money into Air India was really generating any level of national concern sufficient to worry whichever government is in power, would they not seek to jettison Air India as quickly as possible and score all those political points?

There must be some reason behind why this does not happen. On airliners.net, different posters are suggesting reasons along the lines of "employee vote banks" and so on, but to be honest, I don't believe that if the matter were serious enough, an issue like the votes of a few thousand people would really factor into any sort of decision on what to do re. Air India. So far, the most plausible theory that fits why GOI has been behaving this way that I have heard is the debtor-creditor link between Air India and the public sector banks.

So yes, whatever the real reason may be, I DO see it as a problem, no question. Because, in an ideal world, I would like to see an AI free of majority government control, with professional management, strong fleet, and expansive international network (and btw, I don't believe this could have been achieved even by hawking AI off to any of the private-sector players in Indian aviation as was attempted in the failed privatization). However, we do not live in an ideal world, and from what I am reading from GOI's actions, with the recent failed privatization episode, AI seems to be an integral part of the tower of cards of a financial system that GOI has fashioned, and disturbing it in any way could lead to collapses elsewhere.

So, as things are, the powers that be have decided to leave things as is. I can at least UNDERSTAND this reasoning, even if I don't necessarily like the situation. I also see no point in questioning how things got to this situation because the past is the past and can't be changed (sure, we can debate it ad infinitum, but sunk costs cannot be recovered). I would simply hope that they are looking at ways to unravel AI from its debt burden, and from recent media reports, it seems like they are at least talking about it. We can only wait and see if anything actually comes out of it.

And in terms of payments and so on, the reason I am not worried is, again, if GOI has figured out it is in their own best interest to keep AI afloat as a government entity, then you can bet your last dollar that AI will stay afloat. If there is one thing that motivates the GOI, it's self-preservation. Sure, there will be cliffhanger moments, and drama, and emergencies and everything, but again, this is how GOI works and has worked since the very beginning. India didn't even emerge from the License Raj willingly. It had to be dragged out of it kicking and screaming as a last resort of self-preservation.

Anyway, at least that's the only rational way I have found to view this situation.

lightsaber wrote:

Tax payers have a right to complain when what should be a profit center needs infusions of capital again and again.

Countries on the other side of bilaterals also have a right to complain. Subsidies are specifically prohibited.

Lightsaber

Again, apart from a small number of people who are really familiar with the airline world, and the occasional news article, nobody is complaining about Air India in the context of the reasons that are being discussed in this thread.

The vast majority of Indian taxpayers aren't complaining because:

(a) most of them don't know anything about this issue
(b) on the list of things to complain about the Indian government, Air India is NOWHERE near the top

If other countries complain, it would most likely only be at the request of their own airlines (AI's competitors). But this does not happen because:

(a) Foreign airlines don't really see Air India as a threat in any way--AI does not have the scale or the clout to pose a real threat
(b) Foreign countries that have significant air traffic to India generally realize that they benefit from it to such an extent that it is not worth upsetting by picking on the Indian government's protected carrier

Last year, Etihad suspended service to San Francisco. There were news articles out hypothesizing that the inauguration of Air India's Delhi-San Francisco service mere months earlier may have contributed to this (such as this: https://www.anna.aero/2017/08/02/etihad ... francisco/). Even so, I don't hear a peep out of Abu Dhabi about Air India subsidies. Airlines like the USB3 can go throwing hissy fits about subsidies at the MEB3 because they have no direct relationship with those countries. But those latter airlines/countries, and even the likes of Germany, France, the UK, etc. will have to think twice before engaging in similar behavior with India because India has greater leverage over the passenger stream of their carriers.

Now apparently a false letter caused a bit of panic (AI shutdown):
http://news.rediff.com/amp/commentary/2 ... 6fc5c11c94

Looking up? This is a challenging period. When you miss payroll 5 months in a row and haven't paid your debt and ask for huge amounts of money, people become concerned.

It amuses me here that people here state without a doubt AI won't be privitzed. When an ministry such as Air India is heavily funded, it will be a target for cuts.

As to people not complaining on taxes... I hear enough outside of my aviation circles.

The next week will be facinating.

Lightsaber
Oh, foreign airlines do see AI taking the cheap seats. They always want the ability.

The foreign governments don't complain, they Stonewall. It is an issue in bilaterals or am I mistakenly that India somehow has an easier time.

Either way, 90 days is coming up. The politicians who deal with India have no say over bank regulators. Once the line is crossed, cross-covenants come into play.

I don't think there is any plan to shut down AI.
Please Globetrotter, read the books I listed. Big companies and countries get taught a lesson by economics.

Let us just see if anything happens.

What we know is the big money grab was foiled. Air India has been told to come back with a viable plan. Perhaps they get a pass again. Perhaps not. This is high stakes poker and no one has yet folded.

Does one party go into the elections showing they will fold to public unions? Or is this a Regan moment? I don't know. It depends on which vote needs to be swayed. Would the public unions vote in mass for the party in power? Or would they vote against anyway, so are a convenient target?

Sadly, the fate of Air India is very political. By the attempted sale and current standoff, I would say the decision is in play.

Lightsaber

lightsaber wrote:

Now apparently a false letter caused a bit of panic (AI shutdown):
http://news.rediff.com/amp/commentary/2 ... 6fc5c11c94

There is a pattern behind these baseless stories being spread about Air India and its for a reason.

We had a big discussion on this very thread about 19 aircraft being grounded. Note how the lines went silent when I asked them to back up the rants with evidence of 19 aircraft being grounded. Classic hit & run tactics to denigrate airlines like AI & Jet.

They will be back in a week with the same discussion. And then run when asked to back up with evidence. Lather, rinse, repeat.

BawliBooch wrote:

lightsaber wrote:

Now apparently a false letter caused a bit of panic (AI shutdown):
http://news.rediff.com/amp/commentary/2 ... 6fc5c11c94

There is a pattern behind these baseless stories being spread about Air India and its for a reason.

We had a big discussion on this very thread about 19 aircraft being grounded. Note how the lines went silent when I asked them to back up the rants with evidence of 19 aircraft being grounded. Classic hit & run tactics to denigrate airlines like AI & Jet.

They will be back in a week with the same discussion. And then run when asked to back up with evidence. Lather, rinse, repeat.

I started off noting this was a false letter.

As to aircraft grounded, how come AI has so many down for maintenance? How many? It seems excessive?

I've worked aerospace engineering to have aircraft available at a high rate. The 787 for example is designed to have system monitoring to minimize hanger time. A moderate C-check now takes days. A heavy C 10 days. There is a pattern of AI not performing at industry standard.

My experience is a lack of benchmarks is indicative of poor performance. AI should start doing quarterly reports.

But the reality is they are needing more and more investment and that alone will drive speculation. There is quite a bit of evidence AI is not managed well (their financial needs are enough).

When you miss paying salary on time 5 months in a row, employees get panicky and that gets into the news. It is always a competition for government funds which... creates drama.
Evidence is incredibly hard to find on Air India. Good or bad. When you cannot find the good evidence, you loose the benefit of the doubt.

Did they announce they would miss paying leases beforehand with a plan? No
Did they announce they would miss a single months payroll with a plan? No

When a company continually does wrong and is caught, they lose the benefit of the doubt.
This isn't just bad PR, but Air India isn't guiltless. Business is built on timely payment of obligations by all parties.

They need to clean up their act and be a business (make a profit) so the financial entertainment goes elsewhere.
The bad bank is a great idea to make that happen.

Why isn't AI doing their own PR?
Do a PR campaign on changes to improve frequency, service (even if just an advertisement campaign), reduce costs, and make life easier for customers.
Perhaps start an automation drive to cut costs (e.g, have a team look into the functionality of Delta's phone app).

Seriously, the company just asked for $1.6 billion USD from a government of low salary nation. That is a need for a little more than a dollar from every man woman and child of India. That is going to stir up stories when people cannot understand why.

Until there is a very clear path forward, they cannot win the PR battle. But from recent press releases from the GoI, Air India has been tasked with delivering a turn around plan.

As noted from a very astute poster:

BLRAviation wrote:

What I have unable to reconcile is the failure of the sale process.

Filter out all the fluff. For government working, the people i.e. bureaucrats and politicians have to be aligned and the environment should allow for the action to be taken and sold to the public.

(A) If we look at the people.
1. The Civil Aviation Secretary was eyeing the Cabinet Secretary position. A successful sale would have almost guaranteed catapulted him in to the job of the highest ranking bureaucrat in the land.
2. The Minister Jayanth Sinha is no fool. And he is a master when it comes to financial services and investment banking. He would have known onerous terms when he saw them.

I.E. No opposition from either the bureaucracy or politicos.

(B) The environment
1. The Tatas were all set to take AI. If you see the time-line, the terms and conditions were modified to suit them.
2. The government, and most especially Civil Aviation ministry, knew/know they need to jettison AI. So does Finance Ministry.
3. At Civil Aviation Ministry it is all UDAN UDAN UDAN now. Jettisoning AI frees up funds and resources for UDAN.

With all these favourables, how were the terms suddenly made so onerous that all the bidders walked away from the offer? Where, when, and why did this tinkering occur? Even the bidders knew, there simply wasn't enough time for a second round which could have driven down valuations, so that is not an option.

What the heck happened behind the scenes?

Any thoughts?

I can't explain what made a done deal fall apart other than AI had far more debt than realized.

I am afraid UDAN is in danger for the funding for AI must come from somewhere.


Lightsaber

lightsaber wrote:

Why isn't AI doing their own PR?

Clearly you dont understand how an Indian PSU functions. They cannot take these marketing decisions unless its cleared by the Minister - and he wont clear anything that will affect his favorite airline. This favorite airline used to be Jet Airways at one time. Now its Indigo. Airline owners with deep pockets and shifty ideals who keep the ministers in their back pockets succeed. Guess who was given the contract for outsourcing Air India domestic's reservation call centers? Interglobe Aviation - the company that owns Indigo. Before Interglobe, it was Royal Aviation Services - the owners of Spicejet!! Imagine your reservation systems being handled by your biggest competitor!

Air India is just everybody's favorite, convenient whipping boy.

lightsaber wrote:

As noted from a very astute poster:

ASTUTE! That's cute!

lightsaber wrote:

I am afraid UDAN is in danger for the funding for AI must come from somewhere.

Like UDAN is a fantastic way to spend taxpayer's money! UDAN is a way this Govt has created to subsidize private airlines belonging to cronies with a rigged bidding process. Absolutely zero thought put into it. The Govt should be fixing the infra and thats it! Rather than get into this nonsense!

Oh! And when private carriers win a bid for a single flight to a remote city where its unfeasible to place your own staff, guess who has to arrange for ground handling? Any guess?

lightsaber wrote:

When you miss paying salary on time 5 months in a row, employees get panicky and that gets into the news. It is always a competition for government funds which... creates drama.
Evidence is incredibly hard to find on Air India. Good or bad. When you cannot find the good evidence, you loose the benefit of the doubt.

Say what? AI hasn't paid salaries for 5 months? There was a delay in July - of 4 days. This is exactly the kind of half-truths and hyperbole spread by ASTUTE blogger's trying hard to be the poor man's Sambit Patra!

globetrotter94 wrote:

vadodara wrote:

globetrotter94 wrote:

Again, for all intents and purposes, Air India is part of the Indian government. The government shows no sign of wanting to close the carrier or divest itself of it (at least not fully), so the government will ultimately pay the money for the same.

So yes, whatever the real reason may be, I DO see it as a problem, no question. Because, in an ideal world, I would like to see an AI free of majority government control, with professional management, strong fleet, and expansive international network (and btw, I don't believe this could have been achieved even by hawking AI off to any of the private-sector players in Indian aviation as was attempted in the failed privatization). However, we do not live in an ideal world, and from what I am reading from GOI's actions, with the recent failed privatization episode, AI seems to be an integral part of the tower of cards of a financial system that GOI has fashioned, and disturbing it in any way could lead to collapses elsewhere.

As a AI employee, what is the employee's preference? Afterall, if you are remotely career oriented, this is a non-ideal situation.

lightsaber wrote:

Have you read Wealth of Nations? Adam Smith also gave examples applicable to AI. To conclude, I see no way AI cannot be divested. It is going to get more expensive with time to hold on to.

Lightsaber

Unfortunately, this has more to do with Nagpur than New York. The RSS chief somehow feels that 'Air India' somehow needs to be 'protected'. Strange bed-fellows. Left Wing Unions and Right Wing Politico's.

Things are about to get worse for Air India in many different ways. For instance, if Indian Railway manages to roll-out the experimental Train 18 that can shave-off 20-30% time for short/medium distances, it will make it even worse for the airlines. Just like TGV and Chunnel eat into Air France's LHR-CDG milk run. Air India, unfortunately, is even more clueless that the likes of Air France or Alitalia.

Since you are a big fan of Air India, perhaps follow Prabhu a bit. He is an accountant by profession and probably has a better idea than Air India accountants in which black-hole the money is sinking. Again, this is an election year and they are only going to play a holding game. AI's market share is about to go below 10% and most people will forget that it ever existed.

BawliBooch wrote:

lightsaber wrote:

Why isn't AI doing their own PR?

Clearly you dont understand how an Indian PSU functions. They cannot take these marketing decisions unless its cleared by the Minister - and he wont clear anything that will affect his favorite airline. This favorite airline used to be Jet Airways at one time. Now its Indigo. Airline owners with deep pockets and shifty ideals who keep the ministers in their back pockets succeed. Guess who was given the contract for outsourcing Air India domestic's reservation call centers? Interglobe Aviation - the company that owns Indigo. Before Interglobe, it was Royal Aviation Services - the owners of Spicejet!! Imagine your reservation systems being handled by your biggest competitor!

Air India is just everybody's favorite, convenient whipping boy.

lightsaber wrote:

As noted from a very astute poster:

ASTUTE! That's cute!

lightsaber wrote:

I am afraid UDAN is in danger for the funding for AI must come from somewhere.

Like UDAN is a fantastic way to spend taxpayer's money! UDAN is a way this Govt has created to subsidize private airlines belonging to cronies with a rigged bidding process. Absolutely zero thought put into it. The Govt should be fixing the infra and thats it! Rather than get into this nonsense!

Oh! And when private carriers win a bid for a single flight to a remote city where its unfeasible to place your own staff, guess who has to arrange for ground handling? Any guess?

lightsaber wrote:

When you miss paying salary on time 5 months in a row, employees get panicky and that gets into the news. It is always a competition for government funds which... creates drama.
Evidence is incredibly hard to find on Air India. Good or bad. When you cannot find the good evidence, you loose the benefit of the doubt.

Say what? AI hasn't paid salaries for 5 months? There was a delay in July - of 4 days. This is exactly the kind of half-truths and hyperbole spread by ASTUTE blogger's trying hard to be the poor man's Sambit Patra!

For the last five months salary wasn't paid on time. While all were paid, twice was severely (over a week) late. Miss means not timely. Air India has such structural problems they could be declared a non-performing asset.

If you are saying so what, I do not think you see the severity of the problem. Air India has burned through $5+ billion USD of subsidy (due to fuel and leases, it is USD) and needed a (smartly denied) $1.6 billion USD.

Don't misinterpret my words. For five months salary was late. They paid. Mis in economic terms means not on time. Strawman arguments are see through.

It is really bad as a business to be known as not timely in payments.
AI lost money in the good times. They are losing more now.

It isn't bad PR, it is mismanagement of epic proportions. As a government owned entity there are no excuses.

I posted my monthly loss estimates. I'd love to see a quarterly report to know the true numbers.

What happens when the market gets even more competitive? E.g. when GoAir, Indigo, and SpiceJet use the added range of the NEO and MAX to increase international competition?

Will Air India employees be paid on Friday 8/31as promised? Or will it become a fact there is #6 month of AI paying late? Will Air India clear bank debt before 90 days past due. I estimate they have until Tuesday 8/28 +/- a day. Or is it Astute to ignore a possible full default?

You are aware AI is in technical default? (60 days past due)? You are aware for five months in a row employees were paid salaries late?

Perhaps it is a cultural thing. In the US, paying salaries late is a sign if a horrible financial crisis. Please explain why you would be OK with being paid late. Or was it just bad PR the pilots threatened strike over unpaid allowances?

India needs more FDI and that requires transparency.

Lightsaber

vadodara wrote:

globetrotter94 wrote:

vadodara wrote:

So yes, whatever the real reason may be, I DO see it as a problem, no question. Because, in an ideal world, I would like to see an AI free of majority government control, with professional management, strong fleet, and expansive international network (and btw, I don't believe this could have been achieved even by hawking AI off to any of the private-sector players in Indian aviation as was attempted in the failed privatization). However, we do not live in an ideal world, and from what I am reading from GOI's actions, with the recent failed privatization episode, AI seems to be an integral part of the tower of cards of a financial system that GOI has fashioned, and disturbing it in any way could lead to collapses elsewhere.

As a AI employee, what is the employee's preference? Afterall, if you are remotely career oriented, this is a non-ideal situation.

Given the employee unions had negative reactions to the way this privatization drive was carried out, I would say that at least a good portion of them understand that setting Air India free at this point without resolving the financial aspects of the problem as I have described is not in their own interest either. Anyway, I am not an AI employee, nor do I know any AI employee, so my answer is only based on conclusions drawn from media stories.

Now a 7,000 crore "SOS fund" for Air India (An even $1 billion USD).
https://www.news18.com/news/business/ce ... 58367.html

My take: It looks like Air India must have a reform plan to receive funds, but a huge fraction of the prior debt will go into a special purpose vehicle ("Bad bank").
Per the above link, 35,484 crore go to the "Bad Bank" (That is $5 billion USD). I wonder if any real reform will happen. I personally would do the bad bank strategy, but only if significant reform instantly occurred.

This is great news as it separates the banks from Air India from a financial health perspective.
I hope the people of India get a good ROI.

Now above links show Air India has 11,000 full time employees or the GoI is paying $545,000 usd per employee.
Perhaps it is better to use the 27,000 employee number, or $222,000 USD per employee.

Lightsaber

I think what would help me most is if people made an explicit prediction what they think will happen. Not what they think ought to happen, but what they think will happen.

I always find that kind of thing clarifying.

Air India suspending non-mandatory travel (hotels, man-hours):

https://wap.business-standard.com/artic ... 318_1.html

This is a fair cost cutting.

I want to know if the leasing companies have been paid.

I predict ground handling and maintenance will be sounds off. Debt will mostly go to the bad bank as well as non-core staffing.

As to the airline portion, I'm not sure.

Lightsaber

Articles from a few days ago reiterate the government's position that divestment of Air India will not occur now, or in the near future:

https://economictimes.indiatimes.com/in ... 596744.cms

globetrotter94 wrote:

Articles from a few days ago reiterate the government's position that divestment of Air India will not occur now, or in the near future:

https://economictimes.indiatimes.com/in ... 596744.cms

I define near future as before the election.

Have we heard if the debt was made current?

Lightsaber

Extremely excited to know that Rs. 980 crore of Indian taxpayer money is about to be flushed down the drain in the form of funds to Air India to meet its interest payments
https://www.moneycontrol.com/news/busin ... 01441.html

World's best run airline.

Another 2,000 crore:
https://www.ndtv.com/business/air-india ... rt-1910992

When will there be audited quarterly reports so there is a pace to reform?

Were the leasing companies paid? I assume so, but I do not know. (Sad when this has to be asked.)

No, that is not equity support, it is the government guarantee for borrowing.

Government plans to sell Air India's ground handling services unit, AIATSL
https://www.livemint.com/Companies/ZUe8 ... ikely.html

I hope they do a better job of selling this than the flop show of selling AI.

Four subsidiaries to be sold soon:
https://www.madhyamam.com/en/business/2 ... -says-govt

My take:. The smaller the government controlled portion, the easier to manage.
AIATSL
AASL
And the hotels. HCI
Engineering

This will give the airline a better chance.

Lightsaber

Air India should be history, the Indian Governments legacy issues impose bad policies on the rest of the Indian airline industry. Air India should liquidate so he assets can be used more efficiently without the debts and legacy issues.

It appears fuel companies weren't paid:
https://www.businesstoday.in/current/ec ... 82623.html

According to The Economic Times, Air India, which guzzles fuel worth around Rs 20 crore daily, has been issued an ultimatum by the oil marketing companies (OMCs)-unless the national carrier clears its fuel bill on a daily basis, the companies are threatening to withhold supply.
Umm... That is mighty close to being a non-performing asset...

However, it left out oil companies to whom it owes more than Rs 5,000 crore, including interest. Furthermore, the airline has reportedly not been making its daily fuel payment in full for the past one-and-a-half years. "Air India is a PSU and that's why we are continuing to supply. Had it been a private firm, we could have already stopped the supply," a senior executive at a state-run oil company told the daily. "But Air India must realise that we can't go beyond a point.
Is this part of the 48,000crore+ of debt? I suspect no.

Lightsaber