Airline’s ground-handling & engineering units may be put on block.
Plans afoot to sell 2 Air India subsidiaries
New Delhi: Undaunted by the failure of Air India sale, the government may put on block the airline’s ground-handling and engineering units soon. A preliminary information memorandum (PIM) on the two subsidiaries are being prepared at full speed to invite expression of interest (EoI) from interested private parties, a top official told FC.
A successful transaction would help the Modi government make up partly for the poor show on disinvestment of the debt-ridden carrier. The airline drew a blank in the first round of bidding with no private party showing up on the last day of bid submission on May 31.
“We have been advised to offer subsidiaries for sale. The in-house teams are working on preliminary memorandum for ground-handling and engineering units,” said the official.
Industry experts gave thumbs-up to the new move saying there was enough investor interest for these firms.
“Previously, many companies were interested in parts of the Air India businesses but the government insisted and proposed to sell it as one entity. That became too big for anybody’s appetite. I think it is a good idea to sell the airline piecemeal. There would be plenty of ground-handling and MRO companies interested in buying the units,” said Rajan Mehra, chief executive officer at ClubOne Air and former India head of Qatar Airways.
Both ground-handling unit Air India Air Transport Services and aircraft maintenance wing Air India Engineering Services are wholly-owned subsidiaries of Air India.
Air India Air Transport Services is a leading ground handling service provider in India and offers ground handling services at most of the airports in the country. It clocked a revenue of Rs 624.52 crore in FY17 and earned a net profit of Rs 33.43 crore in this fiscal. The company has a total staff strength of 7,242, as per the airline’s annual report.
Following the government decision to sell 74 per cent stake in Air India and the airline’s entire 50 per cent holding in Air India Engineering Services, travel service provider Bird Group and Celebi had earlier shown interest in ground-handling business of Air India.
However, the plan has been put on hold with no private players placing initial bid for the offer.
The aircraft maintenance, repair and overhaul (MRO) subsidiary Air India Engineering Services reported a total revenue of Rs 740.48 crore in FY17. With expenditure surpassing the cash inflow, the firm bled profusely. Its net loss during the period stood at Rs 505.16 crore. But its future looks promising given the fast expansion of the aviation market in the country.
As per a Boeing estimate, the MRO market is expected to grow at 7 per cent CAGR to reach $1.2 billion by 2020. The total annual expense of domestic airlines on maintenance and engine overhaul is about Rs 5,000 crore.
Apart from domestic airlines, some of the major foreign carriers such as Silk Air, Etihad, Qatar Airways and Air Asia are among clients of Air India Engineering Services. The company has 4,755 employees on its rolls at the end of March 2017.