A public listing of Air India (AI) at the earliest could change its fortunes though the government would not fetch any returns on its investment in the loss-making national carrier. Going by civil aviation minister Ajit Singh's observation that the air carrier can return to profits only after 2018, no initial public offering (IPO) is possible before 2020 as the Securities and Exchange Board of India (Sebi) rules requires a threeyear track record of consistent profit making.
An IPO may not give any premium considering the ailing national carrier's monstrous liabilities, but it can certainly help in bring transparency, professionalism and accountability, which is currently lacking in AI .
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"It is better to close down the airline as Air India has got into several problems. An IPO may be an option but the public will not invest. If the government is writing a Rs 30,000 crore cheque, it should clean up Air India's balance sheet and sell the airline to somebody for Rs 5,000 crore," said Mohan Kumar, former chief financial officer (CFO), Air Deccan.
"It will be a hard decision but will be sensible as the government would lose Rs 25,000 crore only once and not Rs 30,000 crore every four years," added Kumar, who had launched Air Deccan's IPO in 2006.
However, since options are being explored to keep the airline afloat, an IPO will be better as it would reduce the level of government's interference in the airline. International airlines - Indonesia's PT Garuda, Singapore's Tiger Airways and Cebu Air Inc of Philippines - which were listed recently are doing well.
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"The management must resolve the issue (Air India strike) immediately and get down to work. An IPO can be possible after Air India delivers 12 months of uninterrupted operations," said Ankur Bhatia, executive director, Bird Group.
The airline board has already approved plans to mobilise Rs 5,000 crore in five years through sale of assets and real estate consultants are being hired. According to the airline's annual report for 2008-09, it had leasehold land valued at Rs 6,353 crore and freehold Rs 705 crore. Building assets were valued at Rs 1,535 crore in 2009. Now, Air India's headquarters in Mumbai can fetch more than Rs 2,000 crore.
The airline is planning to shift its headquarters to New Delhi as big operations have almost moved to the capital since Terminal 3 has been made the carrier's international hub. The move is also aimed to break the back of powerful unions, who have stronghold in Mumbai. If leased out, the 23-storey building with 220,000 sq ft space could fetch a maximum of Rs 66 crore as rent every year.
Courtesy: Mail Today