Directors of Air India Ltd will meet early next month to discuss selling the airline’s properties across the country and transferring the non-operational assets to a government-approved special purpose vehicle (SPV), said two senior officials of the national carrier.
“We missed the target of ₹500 crore that was to be raised through the sale of land assets in FY19. During FY20, we have a similar target and we are hoping to achieve it this time," said one of the persons cited above, who requested anonymity.
“However, a lot of properties that were earlier entangled in legal issues and couldn’t be put on the block have now been sorted. Almost all title deeds for our real estate meant to be put on the block are in place," said the second person, who also requested anonymity.
Air India seeks to sell its real estate assets to raise funds after a failed attempt in 2018 by the government to privatize the loss-making carrier. Former aviation minister Suresh Prabhu said earlier this year that the government would impose strict riders on fresh investments in Air India to make the airline financially attractive before starting a new divestment process. The government is likely to sell its entire stake in Air India if it revisits the privatization of the national carrier to attract more bidders, according to media reports.
In April, Air India managed to sell less than 10 of the 56 properties—mostly residential units in cities such as Mumbai, Delhi, Pune, Bengaluru, Chennai and Kolkata—that it had put up for sale.
The reserve price of these units ranged from ₹16 lakh to about ₹8 crore.
A real estate expert said, under the condition of anonymity, that Air India may face difficulty in finding buyers for the assets at the existing reserve prices, especially in bigger cities, given the current slowdown in the property market.
Meanwhile, the second Air India official cited above, acknowledged that some of the reserve prices of the properties were higher than their market price.
“It is up to the board (of directors) and MSTC to decide whether to bring down the reserve price of the properties that didn’t find any takers during the next round of auctions," the official said, adding that the airline’s board could consider lowering reserve prices of certain properties to expedite their sale.
Air India has tapped state-owned MSTC Ltd, which specializes in conducting e-auctions, to conduct auctions to sell its assets.
The board will also discuss transferring the non-operational assets of the carrier to the government-approved SPV. The government had in February approved setting up of an SPV—Air India Assets Holding—for transferring the national carrier’s working capital loans, which are not backed by any assets, as well as four subsidiaries.
These subsidiaries are Air India Air Transport Services (AIATSL), Airline Allied Services (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India (HCI). Air India Assets Holding also includes other non-core assets such as paintings and artifacts.
The government has also transferred ₹29,464 crore of ₹50,000 crore debt of Air India to the SPV, which will be paid off by monetizing assets under the SPV, including land.