Informal talks have begun to find potential buyers for Air India’s subsidiaries, including its maintenance, repair and overhaul (MRO) business — Air India Engineering Services Limited (AIESL) — even as airlines wait for clarity on the Centre’s next step on divesting its stake in indebted national carrier, Air India.
An expression of interest from India’s oldest private sector MRO service provider, Air Works, has come as a shot in the arm for the Centre that is considering an option to split Air India’s different businesses and hive them off separately.
“Air Works has expressed an interest in acquiring a stake in AIESL which has the largest MRO business in the country with a facility for component and engine overhaul,” sources aware of the development said.
The government believes divesting Air India’s ground-handling, MRO and airline operations separately would make the deal more attractive for private players, Civil Aviation Ministry sources said. The Centre has already received a formal expression of interest from the country’s largest private carrier IndiGo for Air India’s airline operations.
‘Wait and watch’
Vivek Gour, MD & CEO , Air Works said: “I am watching the situation very carefully but it is too early to say anything because the government has to take a call on whether they will sell Air India as a whole or break up its subsidiaries and sell. Nothing is clear. We will wait and watch.”
The Centre may also hold talks with foreign MRO players such as Jordan Aircraft Maintenance Limited (JorAMCo), Hong Kong Aircraft Engineering Company (HAECO) and Etihad Airways Engineering, who are keen to invest in the MRO business in India, to ascertain their interest in acquiring Air India’s subsidiary, sources said.
On June 28, the Cabinet Committee on Economic Affairs, chaired by the Prime Minister,, gave an in-principle nod for strategic divestment of Air India. It also approved strategic disinvestment in Air India’s subsidiaries, including AIESL, ground handling arm Air India Transport Services Ltd., Air India Charters Limited which operates Air India Express and Airline Allied Services Ltd. which operates Alliance Air.
A group of Ministers under Finance Minister Arun Jaitley has been formed to decide on the modalities of Air India’s stake sale. “Whether subsidiaries should go as part of Air India, meaning whoever buys Air India automatically buys this, or whether they should be completely de-merged and divested simultaneously but separately will be decided,” Civil Aviation Secretary R.N.Choubey had said.
AIESL has facilities at New Delhi, Mumbai, Hyderabad, Nagpur, Thiruvanantha-puram and Kolkata for carrying out maintenance, repair and overhaul on various types of Airbus and Boeing aircraft.
AIESL had, however, been incurring losses since its inception in 2013 when it was carved out of Air India as a separate business unit. In 2016-17, AIESL’s losses rose to about 17% to ₹653 crore as per provisional estimates.
“MRO is a capital-intensive industry with high competitive environment with low returns and there is a long payback or cost absorption period in view of the fixed overheads on infrastructure facilities and high wage costs due to licensed manpower,” AIESL’s annual report for 2014-15 said.
