Now, Air India to split, create two arms

Government today 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 Limited (AIESL) and Air India Transport Services Limited (AITSL), an official spokesperson said.

The green signal came two years after 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 this year.

With today's 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 Maintenance, Repair and Overhaul (MRO) business, not only for Air India but other airlines too and tap the potential of nearly USD 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.

Air India would provide AIESL an equity of Rs 375 crore for capital expenditure over a period of three years, sources said, adding that this would be based on equity support received by the national carrier from the government. The subsidiary is 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.

his new subsidiary is projected to make profits from the current financial year itself, the sources said.

... contd.

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