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National Aviation Co plans to turn divisions into separate biz units

National Aviation Co plans to turn divisions into separate biz units
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First Published: Sat, Sep 22 2007. 03 25 AM IST

New move: Vasudevan Thulasidas, chairman and MD, Nacil.
New move: Vasudevan Thulasidas, chairman and MD, Nacil.
Updated: Sat, Sep 22 2007. 03 25 AM IST
Mumbai: The new company created from merging state-run airlines Air India and Indian Airlines, National Aviation Co. of India Ltd (Nacil), is proposing a system in which its various divisions will have to pay for the services provided to them within the company.
For instance, a cargo unit will have to pay for the services provided by the
New move: Vasudevan Thulasidas, chairman and MD, Nacil.
ground-services handling units.
This move, termed as transfer pricing mechanism, is aimed at making all divisions as separate profit centres.
The separate divisions and transfer pricing will practically abolish the conventional department system in Air India and Indian Airlines, and will have a linear organization structure based on the different operations. Accenture is advising Nacil on the new structure. There are six business divisions, dubbed strategic business units, or SBUs: low-fare carrier, cargo, maintenance and repair, ground handling, engineering, and other related businesses.
“The idea behind the transfer pricing system is to make each SBU an individual profit centre,” said S. Venkat, executive director (finance) and company secretary of Nacil.
The company, he said, has set up a governance model and corporate monitoring services to make sure these business units are delivering.
“As part of the merger, a major reshuffle has been carried out within the organization. Nacil has appointed two executives as integration specialists based out of Mumbai and New Delhi,” said a Nacil executive, who didn’t want to be named.
Nacil is also planning to offer employee stock options, better known as esops, to its 33,550 employees.
“Around 5-10% stock dilution may be done through esops before a proposed initial public offering (IPO),” said another Nacil official, also on condition of anonymity.
Nacil chairman and managing director Vasudevan Thulasidas has said the company is considering a proposal, but details are yet to be finalized.
Not all employees of the airline are enthused.
“We are going to oppose the proposed IPO as it will result in privatization of the company. Only a state-owned airline can connect far-flung areas without considering profitability aspects, unlike private carriers,” claimed D.K. Shetty, president of Air Corporation Employees Union that accounts for 14,000 of the total 18,000 employees at Indian Airlines.
“We (have) lost faith in Praful Patel (Union civil aviation minister) and we don’t expect justice from him in this merger process. Majority of our demands are not yet fulfilled by the new company,” he added.
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First Published: Sat, Sep 22 2007. 03 25 AM IST