AI to spin off MRO, ground handling

Air India is set to launch two separate subsidiaries — for maintenance, repair & overhaul (MRO) and ground handling services — this year.

Arvind Jadhav, chairman and managing director of National Aviation Company of India (Nacil), which runs Air India, said, “though these will be under the Air India banner, they will be separate entities.”

The subsidiaries will help the ailing airline save resources for the coming financial year.

“We plan to generate Rs 3,000 crore from the MRO subsidiary and Rs 1,000-1,500 crore from the ground handling arm,” Jadhav said.

Jadhav also said work on the MRO segment will begin in April 2010. “We are yet to develop a business plan for the ground handling subsidiary. As for the MRO investment, we will only be investing for manpower, as the facility to run the same is already in place,” said Jadhav.

Air India had a venture with Boeing to set up a MRO centre in Nagpur. Though the project is not scrapped, Jadhav said the new subsidiary will be under the Air India banner and will be supported by Boeing. The US aircraft manufacturer will invest $100 million, while Air-India will provide manpower, land and hangars at the MRO unit.

The airline will also expand its cargo segment and will soon be looking into the express market. Jadhav said Air India will tie-up with larger cargo players for door-to-door delivery. Sources said the airline may look into tie-ups with international cargo players.

Having recorded losses to the tune of Rs 5,500 crore in 2009-10, the airline is restructuring its operations and cutting costs. “We expect a net benefit of Rs 563 crore in terms of cost reduction for the entire year (2009-10) because of network restructuring, and route aircraft deployment rationalisation,” Jadhav said.

The government has agreed to give Rs 800 crore to the airline on the condition it continues to cut costs.

In an effort to redeploy aircraft, the airline is planning to phase out 34 aircraft by March 2011 and induct nine planes during the same period—six Airbus A-321s and three Boeing 777s.

“There is no need to keep surplus aircraft. One aircraft at 80% capacity is better than having two or three at 50% capacity,” Jadhav said.

The airline is also targeting savings through fuel efficiency. “We have saved Rs 146 crore on account of fuel savings programme, so far. By the time we get the software (to facilitate better fuel management), we expect around Rs 800-900 crore savings in the future,” the CMD said.

The fuel efficiency programme envisages changes in Air-India’s operational techniques, planning for flights, equipment settings, use of fuel, engine maintenance and cabin weight management.

(With NW18)