The Cabinet has given its nod for Air India to hive off Air India Engineering Services and Air India Transport Services into wholly owned subsidiaries of the airline.
The Engineering Services subsidiary will take care of maintenance, repair and overhaul (MRO); while the Transport Services will take care of ground handling services, which includes jobs like ticket check-in.
The decision to set up two separate subsidiaries of Air India is part of the turn around and financial restructuring plan for the state-owned airline.
MRO TO BE PROFITABLE
The MRO company is projected to turn profitable from 2017-18. About 7,000 employees of Air India will migrate to this new subsidiary company. The MRO activities of Airbus and Boeing aircraft will also allow Air India to look at garnering business from other airlines.
Civil Aviation Minister Ajit Singh recently said that the proposal to hive off MRO business of Air India Engineering Services Ltd will allow the firm to tap an estimated $1.5-billion MRO business in the Asia Pacific Region.
To ensure that the two subsidiaries can also provide services to other airlines, the staff in these companies will strive towards providing improved quality services benchmarked to global standards.
If the companies provide services to other airlines, they can also achieve reduction in overhead costs, apart from improved productivity on a low cost platform, accountability for growth and profits, officials said.
Air India has supported the move to hive off the MRO business from Air India and develop it as an independent business and profit centre.
In August 2010, the board of directors of Air India Ltd approved a proposal to hive off Air India Engineering Services. The board had also sent a note to the Ministry of Civil Aviation to approach the Cabinet for starting the subsidiary.