INDIA: Beleaguered Air India to hive off two subsidiaries

In a move to restructure its balance sheet, cash-strapped national flag carrier Air India will shift at least one-third of its work force – around 10,000-12,000 out of a total workforce of 31,000 – to two new strategic units responsible for ground handling and engineering. The two subsidiaries – Air India Air Transport Services Ltd […]


In a move to restructure its balance sheet, cash-strapped national flag carrier Air India will shift at least one-third of its work force – around 10,000-12,000 out of a total workforce of 31,000 – to two new strategic units responsible for ground handling and engineering. The two subsidiaries – Air India Air Transport Services Ltd for ground handling and Air India Engineering Service Ltd for aircraft maintenance will likely be hived off from the parent company as subsidiaries and will start operations immediately after the government clears the proposal. The clearance is expected by the fiscal year-end in March 2011, according to two Air India executives quoted by Livemint.com. 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. In 2007, when Air India and Indian Airlines merged to form a single entity, the airline had 34,500 employees on its rolls. The transfer of one-third of the employees to two subsidiaries will strengthen the balance sheet of the parent company and help the carrier achieve better aircraft-to-employees ratio of around 1:150, say analysts. The creation of the two subsidiaries may help the management focus more on the airline, which is burdened with a Rs.400 billion (US$8.8 billion), which includes Rs.19 billion of working capital loans. Air India, which has a fleet of 160 aircraft, posted a net loss of Rs.5.6 billion in the year ended March against the previous year’s net loss of Rs.7.2 billion. The carrier is also buying 68 aircraft from Boeing Co. and as part of this deal the US-based plane maker is building an MRO facility in Nagpur. “The necessary land for the MRO has been handed over to Boeing by the state government project MIHAN (Multi-model International Cargo Hub and Airport at Nagpur). The facilities are slated to be fully operational by end-2012 end and will include an engine maintenance facility with Air India forming a joint venture with GE Aviation.