MUMBAI: The ailing carrier Air India has handed over its profitable 'aircraft ground handling' business in Thiruvananthapuram (TVM) airport and a part of the revenue earned from it to a private company in the name of a joint venture. Air India used to earn Rs 40-45 crore a year from the business, but with this move the earning is down by 50%.
The term aircraft ground handling refers to services such as loading/unloading cargo, bags and food containers; cleaning cabin, towing the aircraft etc. Till May end, Air India and its fully-owned, low-cost subsidiary, Air India Air Transport Services Ltd (AIATSL) carried out the ground handling jobs for flights operated by nine foreign airlines in TVM. "In the first week of May, AI informed its southern station that its TVM ground handling contracts have been novated to Air India-Singapore Air Terminal Services (AI-SATS) with retrospective effect from April 1,'' said a source. AI-SATS is a private 50:50 joint venture company. So when AI's ground handling contracts are novated to AI-SATS, the revenue earned by the national carrier goes down to 50%.
Another detail is that about a month before his retirement in July, one of the AI general managers (finance) brought out an order to transfer the ground handling revenue earned by AI-AIATSLin TVM in the months of April and May to AI-SATS. Documents with TOI show that AI-AIATSL provided ground handling services for these nine airlines till May end and AI-SATS took over only in June. "So the AI billing section based in Mumbai was surprised to see this order. It adds up to Rs 7-8 crore,'' said a source. Air India responded to all but this particular query.
The term aircraft ground handling refers to services such as loading/unloading cargo, bags and food containers; cleaning cabin, towing the aircraft etc. Till May end, Air India and its fully-owned, low-cost subsidiary, Air India Air Transport Services Ltd (AIATSL) carried out the ground handling jobs for flights operated by nine foreign airlines in TVM. "In the first week of May, AI informed its southern station that its TVM ground handling contracts have been novated to Air India-Singapore Air Terminal Services (AI-SATS) with retrospective effect from April 1,'' said a source. AI-SATS is a private 50:50 joint venture company. So when AI's ground handling contracts are novated to AI-SATS, the revenue earned by the national carrier goes down to 50%.
Another detail is that about a month before his retirement in July, one of the AI general managers (finance) brought out an order to transfer the ground handling revenue earned by AI-AIATSLin TVM in the months of April and May to AI-SATS. Documents with TOI show that AI-AIATSL provided ground handling services for these nine airlines till May end and AI-SATS took over only in June. "So the AI billing section based in Mumbai was surprised to see this order. It adds up to Rs 7-8 crore,'' said a source. Air India responded to all but this particular query.
The move is questionable on several other counts as well. Firstly, AI handed over its ground handling contracts to AI-SATS under the guise of the new ground handling policy, even though the said policy does not apply to TVM airport. More importantly, the move goes against AI's financial restructuring plan, which were submitted to the government by the ailing carrier when it sough financial aid. Under these plans, AI touted its ground handling business as a profit-making centre and proposed to hive off the business to its fully-owned subsidiary AIATSL in order to boost profits. The proposal was cleared by the Cabinet Committee of Economic Affairs on April 12. AI's plan to give away a part of its ground handling pie to AI-SATS, like done in TVM airport, does not feature in these plans. AI spokesperson said that TVM was given to AI-SATS under the ground handling policy. He did not elaborate why the decision which was contrary to the airline's turn around plan was taken.
The move to hand over ground handling contracts held in TVM to AI-SATS has been in discussion since December 2010. "A few AI board members mooted the proposal and it was never questioned why should TVM be given up to AI-SATS in a hurry though the airport was not under the new ground handling policy," said an airline top official. Rohit Nandan, chairman and managing director of Air India is also the chairman of AI-SATS board. Other than this two out of five members on the AI-SATS board are AI directors.
The move to hand over ground handling contracts held in TVM to AI-SATS has been in discussion since December 2010. "A few AI board members mooted the proposal and it was never questioned why should TVM be given up to AI-SATS in a hurry though the airport was not under the new ground handling policy," said an airline top official. Rohit Nandan, chairman and managing director of Air India is also the chairman of AI-SATS board. Other than this two out of five members on the AI-SATS board are AI directors.
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