Two AI subsidiaries set to take off by year end

Airline pins hope on immediate profitability of the two ventures


Sweta Ranjan | June 30, 2011

Two proposed subsidiaries of Air India (AI)are set to take off by the end of the year. A cabinet note on operationalising the subsidiaries for ground handling and maintenance, repair and overhaul (MRO) has already been forwarded to the cabinet secretary for circulation so that the issue of equity infusion can be taken up by the cabinet committee of economic affairs (CCEA) in the next few weeks.

An Air India source said, "There is a strong possibility that the two subsidiary companies will get operationalised as soon as the government gives the nod in the near future." The airline has already floated the two companies Air India Air Transport Services Ltd for ground handling and Air India Engineering Service Ltd for aircraft maintenance.

The source claimed that this step would help in the revival of the Air India and both subsidiaries would be able to earn profits right from the first year itself.

"In a move to restructure ailing carrier’s balance sheet, cash-strapped national flag carrier Air India will shift at least 50 per cent of its work force to two new strategic units that will take care of ground handling and engineering. This will help in releasing the burden of the parent company," airline executives say.

Ground handling includes general administration, baggage, freight and mail handling, and the engineering division takes care of maintenance, repair and overhaul (MRO) of aircraft bodies and engines.

"Around 11,000 employees will be transferred to the engineering unit and 7,500 will be shifted to ground handling subsidiary. The engineering and ground-handling businesses will get functional as separate entities immediately after the government gives its green signal," the AI executive said.

According to experts, the transfer of employees to new subsidiaries may witness agitation by workers but the step will help in revival of the parent company.

"In 1996 also, Air India had identified a few separate units like the jet engine overhaul shop and the central training establishment of the airlines as profit centers, but nothing could be achieved in this direction," said a senior pilot of Air India.

The subsidiary companies will be mandated to provide service not only to Air India but also to the other airlines. A source explained, "For example, if Kingfisher sent its aircrafts to Atlanta for maintenance, servicing takes around 6 to 9 days but if our subsidiary units are available in India it would only take 2 days for any aircraft to avail the service." He adds, "This way the two units will start earning from the very first day of staring its operations."

The bases for these units will be Delhi, Nagpur, Trivandrum and Mumbai and more bases would get operational in the next phase. The four bases of the first phase will have the maintenance capacity of approx 300 aircrafts.

The two new subsidiaries have also submitted their own business plan to the government.



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