Air India showing signs of revival

In November 2012, Air India made a positive Ebitda (earnings before interest, taxes, depreciation and amortisation) of Rs 20 crore (Rs 200 million), for the first time since its merger with Indian Airlines, showing it is making a revival of sorts, a senior executive of Air India said.

"However, Air India will need to monetise its assets within this fiscal to show positive Ebitda in 2012-13, as per the turnaround plan. We are also hoping for positive Ebitda in December," said the executive.

In the same month last year, Air India made an Ebitda loss of around Rs 150 crore (Rs 1.5 billion).

Also, with the gradual shrinking of Mallya-owned Kingfisher Airlines and rise in fares by 30-40 per cent in 2012-13 as compared to last year, the carrier improved its market share from 16 per cent to 20 per cent in the last seven to eight months.

"Any indicator turning positive for Air India is a good sign for them, as well as industry. It is a good trend. However, we will have to see it for a quarter or a year to see how much the turnaround plan paid off. But definitely, the capacity gap left by Kingfisher benefited Air India," noted Amrit Pandurangi, senior director of Deloitte.

However, other aviation experts raised doubts as the carrier showed Ebitda profit just for a month.

Moreover, Ebitda does not include depreciation.

"Depreciation is a very tricky thing. How exactly Air India has calculated depreciation matters a lot. As an example, if they have spread depreciation over 12 months or not," said an expert.

As the monetisation of land within the next 3 months will be critical for Air India to show EBITDA positive for the whole fiscal, the carrier is gearing up for the challenge. As per the turnaround plan, Air India plans to monetize assets worth Rs 500 crore (Rs 5 billion) for the next 10 years.

"We are planning to sell the land beside Baba Kharak Singh Marg (in New Delhi) at around Rs 650 to 750 crore (Rs 6.5 - 7.5 billion). We expect to fetch around Rs 75 to 100 crore (Rs 750 million - Rs 1 billion)annually by leasing some floors of the Air India building at Nariman Point (Mumbai)," said an Air India official.

However, the registration for the Baba Kharak Singh Marg property was never made. The lack of registry will be a hindrance in the sale the asset as documents will be required.

Clarifying the position of Air India on this, another senior official said, "We bought the property on Baba Kharak Singh Marg at a cost of Rs 15 crore (Rs 150 million) in 1983. However, it took us time to take the possession of the land as there were many encroachments on it. The IOCL (Indian Oil Corporation Limited) petrol pump was the last encroachment which was cleared just before the Commonwealth Games in 2010."

"We are hopeful of getting this property registered and monetised well within time. We have been approaching the union Ministry of Urban Development for quite some time so as to get the property registered in Air India's name so that we can sell it," added the official.