Air India’s plan to hive off Strategic Business Units delayed once again

Air India’s plan to hive off two Strategic Business Units or SBUs has been delayed further. The new subsidiaries — Air India Transport Services Ltd

Written by Mihir Mishra | London | Published: June 14, 2013 1:17:25 am

Air India’s plan to hive off two Strategic Business Units or SBUs has been delayed further. The new subsidiaries — Air India Transport Services Ltd (AITSL) for ground handling and Air India Engineering Services Ltd (AIESL) for engineering — are likely to start operations by 2013-end.

“We are in the process of registering the companies now and that requires a lot of work. All major approvals have come from the government and we will be able to start operations of these subsidiaries by the end of this calendar year,” said a senior Air India official,who was part of the aviation minister’s delegation to London.

The formation of the two new subsidiaries has missed two deadlines since the proposal was cleared by the Cabinet in September last year.

The first deadline was 2012-end,which was deferred due to a section of employees moving the court against and the move.

The second deadline of February 1,2013,was also missed due to delay in getting approvals for registering the companies.

With the formation of the subsidiaries,Air India will be able to make itself leaner by shifting around 13,000 employees into these two subsidiaries. Air India’s employee strength will come down to 17,000 and its annual wage bill will also come down by Rs 1,400 crore from Rs 3,000 crore.

However,with the formation of subsidiaries,Air India will have to pay service tax over the services offered by these subsidiaries.

According to the approved plan,the parent company will infuse around Rs 900 crore in these two subsidiaries,which will be board-run companies with the Air India CMD as chairman.

Meanwhile,Air India has also decided to defer the proposal of getting in a foreign partner for the engineering subsidiary by two years.

“If we need a better valuation for our company,we need to develop it first. Hence,we have decided to work on making our engineering subsidiary stronger and get in a foreign partner only after two years. This will fetch a better valuation for our company,” said the official.

The airline has also decided that the ground handling subsidiary will buy stake in Air India Singapore Airport Terminal Services (AISATS),which is a ground handling subsidiary between AI and SATS with the national carrier owning 50 per cent stake in the company.

“The ground handling subsidiary will buy stake from us in AISATS and the airline will completely move out of all these businesses,”said the official.

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