The government, on Thursday, approved a Rs.768-crore proposal to hive off engineering and ground handling services of Air India into two wholly-owned subsidiaries as part of its turnaround plan.
A meeting of the Union Cabinet, chaired by Prime Minister Manmohan Singh, cleared the proposal to create the two subsidiaries — Air India Engineering Services Ltd. (AIESL) and Air India Transport Services Ltd. (AITSL), an official spokesperson said.
The green signal came two years after the Air India Board approved operationalisation of the two subsidiaries, and submitted a note to the Civil Aviation Ministry to get the Cabinet nod. The Ministry had cleared the proposal in April.
With this decision, Air India would begin the process of transferring the assets and manpower to AIESL and AITSL, which would be treated as separate profit centres.
AIESL would carry out the maintenance, repair and overhaul (MRO) business, not only for Air India but also for other airlines, and tap the potential of the nearly $1.5-billion MRO business in the Asia-Pacific Region.
At present, Indian carriers have to send most of their planes to Europe and even Dubai and Singapore to get them repaired or for mandatory checks.
Equity infusion
Air India would provide AIESL an equity of Rs.375 crore for capital expenditure over three years, sources said, adding that this would be based on equity support received by the national carrier from the government.
The subsidiary was projected to make profits in five years. About 7,000 employees of Air India would migrate to it.
AITSL, which would carry out the ground handling services, would be provided equity worth Rs.393 crore by Air India over 12 years. About 12,000 employees will shift to it.
This new subsidiary was projected to make profits from the current financial year itself, the sources said.
Air India has total staff strength of about 29,000.
It’s aircraft-manpower ratio last year was 263 as against 150 in Jet Airways, 111 in Kingfisher and 102 in Indigo. With the hiving off, this ratio was expected to come down considerably, the sources said.
Air India, which reported an estimated loss of Rs.7,853 crore in 2011-12, has an accumulated loss of Rs.20,000 crore over the past five years. Under the government-approved turnaround and financial restructuring plans, a total equity infusion of Rs.30,000 crore has been planned till 2021
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