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Corporate Apr 12, 2012

AI to split into two, Rs 30,000 cr to be infused: Ajit Singh

By Firstbiz Staff

The government will split Air India into two subsidiaries, one for passenger services and the other for maintenance and repair of aircraft, and will infuse 30,000 crore into the ailing airline by 2020, Minister for Civil Aviation Ajit Singh said today.

"Under the turnaround plan Air India will hive off two subsidiaries: one for transport and another for Maintenance Repair Overhaul (MRO). They will become fully owned subsidiaries of Air India," Singh told reporters today.

The airline will receive Rs 30,000 crore by 2020 from the government. PTI

The minister said the central government will infuse Rs 30,000 crore in the airline by 2020 but will have a number of checks to make sure that the airline maintained performance standards.

Among the parameters that the government will monitor while freeing funds for the Air India include ensuring that the airline raises its on time performance from the existing 71 percent to somewhere between 80 to 90 percent, he said.

Another milestone for release of money is that training facilities in Hyderabad should be professionalised, he said.

"We seek co-operation of the employees but lets be very clear that Air India needs to rationalise costs, otherwise the government cannot and will not use public money to run Air India," Singh said.

The government will form a committee within a week to oversee the implementation of the debt restructuring plan for the national carrier that was finalised by the Cabinet Committee for Economic Affairs today.

As per the restructuring plan 7,000 employees will go to the engineering MRO wing and 12,000 to the transport services of the airline, the minister said.

Of the Rs 30,000 crore, government will infuse Rs 6,750 crore into the airline this year. Rs 7,400 crore of Air India debt will be converted into non-convertible debentures and some short term debt will be converted into long term debt, Singh said.

This should result in a saving of Rs 1,000 crore per year, he said. The minister said the airline would also see a large number of retirements in the next three years which should help in saving on wages and they expected savings of Rs 250 crore in the first year which would rise with every year.

The government expected the MRO operations of the airline to be profitable as it could cater to not only Air India but other airlines as well.

"We are at a stage in aviation in India where MRO will be very important," he said, adding that the airline currently sends planes to places like Sri Lanka and Singapore which would change.

Air India would also continue with its plan to induct 27 new aircraft,including the delayed Boeing 787 Dreamliner aircraft, that it has already placed orders for, he said.

The minister said the first Dreamliner aircraft should be received in two months.

He also said all the commitments made by the government during the merging of Air India with Indian Airlines would be honoured by the government.

He said the proposal to allow Foreign Direct Investment in Indian airlines would come before the cabinet soon and after all checks were carried out it could be passed.

"There will be a number of mechanisms that will safeguard intrests of domestic carriers," he said adding that two-thirds of the airlines directors would still need to be Indian and control would have to be in an Indian national's hands.

by Firstbiz Staff

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