A-I pondering JVs for key strategic business units

If done, will get half its employees off its rolls, discussion on.

The restructuring plan under discussion to bring National Aviation Company of India Ltd (Nacil) back on track may include getting joint venture partnerships for its key strategic business units.

That includes cargo, engineering and maintenance, repair and overhaul (MRO), as well as ground handling and airport services, and shifting employees to these JVs.

According to top sources in the airline, about half the employees will shift to these JVs, which will be clearly focused on the areas of operation and will have to make money. A report on the restructuring of the airlines will be placed before the government in 30 days, according to Civil Aviation Minister Praful Patel.

Sources in Air India said the company would be looking for an international partner for the cargo business and hopes to set up two JVs in the MRO area, one each with Boeing and the other with Airbus. Third, it will also push for kick-starting the proposed joint venture for ground handling in which it has a tie up with Singapore Airport Terminal Services (SATS). AI will have a 51 per cent stake in the company and the remaining portion will be held by AI.

With these measures, Nacil will be able to reduce its employees by half, from 31,500 to a little over 15,000, and bring down the average number of employees per aircraft from around 205 to around 100, which are in line with global averages.

However, there has been a contrarian view within the AI management, who say that hiving off the SBUs into joint ventures might increase the costs for operating aircraft. “The pros and cons have to be looked into. On one side, JVs will lead to a clearer focus in running these businesses and profit motive. On the other hand, AI will have to pay for these services like ground handling and MRO and also lose revenue on cargo which can be profitable,” said a senior source in AI.

Former chairman Raghu Menon, who was told to go by the civil aviation ministry, is believed to have raised these issues with the government.

Meanwhile, Chairman and Managing Director Arvind Jadhav, who was sent by Patel to persuade Ratan Tata to join the board of Air India, is still waiting for his response, say close watchers. Ratan Tata is abroad and was not reachable for comment.

Patel is planning to appoint around seven independent directors, people who are well established and national figures in the country, on the advisory board. He has also made his intention public of appointing a chief operating officer.