The Telegraph
Thursday , October 27 , 2011
Since 1st March, 1999
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Bid to hive off AI maintenance unit

New Delhi, Oct. 26: The government may consider spinning off Air India’s maintenance, repair and operation (MRO) wing from its engineering division at the next meeting of the group of ministers slated to be held soon.

The meet will also consider an additional equity infusion into the national carrier and the fate of a $4-billion (Rs 19,600 crore) aircraft purchase order from Boeing. The need to spin off the MRO unit was suggested in a report of a parliamentary standing committee on transport last year.

Initially, Air India had planned to enter into an MRO venture with both Boeing and Airbus. However, AI officials said the venture with Airbus had hit a hurdle after the European airspace company agreed to start another venture with Pipavav Defence and Offshore Engineering Company Ltd in September.

“As far as we know, the deal is on the back burner as AI is yet to start its MRO facility in the particular deal. But talks are still on,” said a senior AI official.

Boeing continues to be a viable partner. In July, the national carrier announced plans to establish a $100-million MRO hub with Boeing in Nagpur. The joint venture will be set up in Mihan SEZ and will open in 2013.

Top on the GoM’s agenda would be to clear the turnaround and financial restructuring plan for the airline, said one of the officials who declined to be named.

Air India has sought Rs 6,600 crore additional equity in this fiscal alone. Future commitments will be based on the new turnaround plan prepared by a group of officers from the finance ministry.

“We have the report and the ministry is studying it. The MRO project is being considered as a part of Air India’s turnaround plan. We have adequate number of engineers to kickstart the joint venture and it’s just a matter of time that it’s started,” said a senior ministry official.

The MRO business is likely to absorb almost 11,000 employees, while the ground handling business will take in another 8,000; the proposal to hive off the two businesses is awaiting approval of civil aviation minister Vayalar Ravi. “The move will create two separate profit centres for the airline and at the same time absorb non-core business employees.” said an AI executive.

Air India’s 9,000-strong engineers give the ailing airline the capability to offer quality maintenance services.

According to ministry officials, the ailing carrier needs to hasten the process of diversifying from just the sale of air tickets as it has proved inadequate in revenue generation. The ministry along with the management is working speedily towards starting the MRO.

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