Instead of renting out unused portions of iconic Nariman Point building for the huge sum, the debt-ridden airline is paying Rs 22 lakh each month for its upkeep; 15 of its 23 floors are lying vacant
AT a time when Air India is reeling under losses to the tune of a few thousand crores, one would imagine that the airline would be leveraging all its assets to lessen its debt burden.
One of the empty floors in the Air India building. The area of each floor is around 10,000 sq ft
MiD DAY has learnt, however, that the national carrier is passing up on an opportunity to earn nearly Rs 80 crore per year (after taxes and expenses) from leasing out the unused portions of the iconic Air India building at Nariman Point.
And now for the real shocker not only is the airline giving up the chance of making money, it is actually paying out nearly Rs 22 lakh per month, or a whopping Rs 2.64 crore a year, from its own coffers for the upkeep of the centrally air-conditioned structure.
The ground-plus-22 storey structure has only one tenant an IT consultancy firm and the airline itself uses less than seven floors. This means that 15 floors are lying vacant in the most iconic building of what is, arguably, the country's most important and expensive business district.
Sanjay Dutt, CEO (Business), Jones Lang LaSalle, a global real estate services firm, said, "Air India owns collector lease hold rights to the most strategically located and prominent building measuring approximately 220,000 sq ft (ground floor-plus-22 storeys), which can earn the airline up to Rs 80 crore of rental per annum.
This is calculated on the basis of a rent of Rs 300 per sq ft, post maintenance and property taxes. If the building is monetised (sold), it can fetch the airline Rs 800 crore.
"Most private and government undertakings, such as Borosil, Bayer, Hindustan Unilever Ltd., Mafatlal Industries Ltd. National Textile Corporaion and the Railway Land Development Authority, are, today, conscious of their surplus or non-performing assets.
They are either selling or creating rental income to fund expansion, to have sustainable income or to retire debt/liabilities. The Air India building is definitely a rare and valuable asset and, considering the challenges the national carrier is facing, any delay in its efficient use is a national loss."
While Air India officials say that they spend a few lakhs towards maintaining the tower every year, Dutt said, "The airline must be spending approximately Rs 10 per sq ft, per month for maintaining the building. In other words, it must be spending Rs 22 lakh on the building's maintenance every month (2,20,000 sq ft X Rs 10)."
Dutt added, "Although challenged by the Bandra-Kurla Complex, Mumbai's Central Business District (CBD), comprising Nariman Point, Churchgate, Cuffe Parade, Fort and Ballard Estate, continues to remain a key office market for India Inc.
Besides housing the offices of RBI, SBI, LIC, Bombay Stock Exchange, Shipping Corporation of India, Mckinsey & Co, Tata Sons, Reliance Industries Ltd. and ADAG etc, Nariman Point also commands the maximum rent amongst all other CBD micro markets.
Former Air India Executive Director Jitendra Bhargava said, "Air India has property worth several crores in India and abroad. The Air India building should be rented out if it can generate decent revenue at a time when the airline needs money desperately.
However, I have always maintained that the solution to Air India's current problem lies in increasing revenues from passenger traffic, cargo handling and providing third party services for engineering and ground handling to other international airlines. Renting is fine but the disposal of properties is something I cannot agree to."
The airline's management has asked its 28,000-plus employees to come up with ideas for the 10 per cent mantra 10 per cent reduction in cost, 10 per cent increase in revenue and 10 per cent improvement in accuracy.
Each idea will be evaluated on the basis of feasibility and cost saving etc by a specially appointed core committee. Till now, around 300 entries have been received. The best ideas will be implemented and the employee will be rewarded accordingly.
Rent: Rs 2.5 per sq ft
Air India insiders revealed that the building was constructed in the early 1970s and soon became an integral landmark of the city.
The centrally air-conditioned tower had the country's first escalator used in the ticket booking area an underground two-layer parking facility, high speed elevators, fire fighting equipment, etc.
Apart from being the airline's headquarters, the tower also became the official address for over 30 high-profile companies. Each floor in the tower was estimated to have an area of approximately 10,000 sq ft and the lease price was Rs 2.50 per sq ft.
Air India kept seven floors for its operations, which also accommodated the 22nd-floor office of the Chairman and Managing Director of the airline. The boardroom is on the topmost floor and offers an excellent view of the city, Marine Drive and the sea.
The building's security was beefed up post the 1993 serial bomb blasts after one bomb went off inside the building's parking area.
"In 1995-1996 the airline's management wanted to generate more revenue and it was decided that the building's rent would be increased.
While a few tenants vacated the premises gracefully, some had to be persuaded and still others left only after a protracted legal battle. The last tenant left only two years ago," said a senior official from the airline, on condition of anonymity.
-The area of each floor is approximately 10,000 sq ft
-The present rental value in the area is more than Rs 300 per sq ft (after tax and deductions)
-Renting out each floor will fetch Air India more than Rs 30 lakh a month (after deducting maintenance cost and property tax dues)
-The airline had 40 ticket booking counters in the building initially, which are now down to eight
-Only a few hundred people visit the building today, against a few thousand earlier
-The maintenance cost of the building is still borne by Air India
The Other Side
"Air India has already seized the issue (of leasing out properties) and we are in the process of moving forward with this. A detailed report has already been sent to the Ministry of Civil Aviation and the implementation will begin once the Union government's consent is received," said an Air India spokesperson.
The approximate sq ft area the Air India tower had on each floor
The number of ticket booking counters the building had initially
Did you know?
Nariman Point, Mumbai's premier business district and the country's first central business district was named after Khursheed Framji Nariman, a Parsi visionary. It stands on land reclaimed from the sea and had the distinction of having the highest rent ($175) for commercial real estate in the world in 1995