Mumbai: Air India Ltd said it will hive off its ground handling and engineering subsidiaries from 1 February and operate them as separate profit centres.
Air India Air Transport Services Ltd (AIATSL) will undertake ground handling activities across various airports in India and plans to offer its services to other airlines, apart from carrying out similar jobs for Air India, the national airline said in a statement on Wednesday.
“Air India Engineering Services Ltd (AIESL) will, similarly, undertake engineering maintenance, repair and overhaul activities, not only for Air India’s fleet but also extend its services to other carriers,” the note said.
The plan to separate these two units is part of the airline’s turnaround plan, which was approved by the cabinet committee on economic affairs in April last year. Starting 1 February, employees working in the ground handling and maintenance facilities will be deputed to these independent firms, but their service conditions, emoluments and perks will remain unchanged, the statement said. AIATSL was formed in 2003 and AIESL in 2004.
The ground handling unit was formed to undertake activities for Air India and other airlines operating in the country. Some of the clients of the company in India include Singapore Airlines, South African Airways, Emirates, Kuwait Airways and Ethiopian Airlines.
“Air India would, initially, provide for the capital expenditure of the two subsidiaries to stabilize their operations. Operationalization of the two subsidiaries will also bring down the aircraft–employee ratio to global standards,” the airline statement said.
Air India has 28,000 permanent employees. In the next five years, the headcount will be reduced to 21,000 through measures including a voluntary retirement scheme.
On 18 December, junior aviation minister K.C. Venugopal told Rajya Sabha, the upper House of India’s Parliament, that the aircraft-employee ratio at Air India was 1:237 in January 2012. Once the firm separates its engineering and ground-handling activities, the ratio will improve to 1:92, the minister said.
A senior Air India executive, requesting anonymity, said 7,400 employees will be transferred to the engineering subsidiary and 12,000 employees will be moved to the ground handling division.
“These subsidiaries will be having separate balance sheets and profit and loss accounts, making the balance sheet of the holding company (Air India Ltd) lighter. These subsidiaries will be able to raise working capital at better rates as they will own quality assets, including workshops and equipment transferred from Air India,” he said.