New Delhi: Air India (AI) plans to separate — operationally and financially — its ground handling and engineering units into two separate subsidiaries and transfer 18,000 employees to them from the mothership.
The ‘spinning off’, as it is called in corporate parlance, will mean AI will no longer be paying the expenses of running the two strategic business units or SBUs, as they will be called.
And since both are existing businesses that already generate money, their income will be used to meet expenses such as salaries.
The airline’s long-pending proposal to create these SBUs is yet to get the government’s nod, but once that comes, there will be a saving of almost Rs1,500 crore every year in salaries alone, or 50% of the national carrier’s annual salary bill of Rs3,000 crore.
Sources familiar with the development said AI plans to shift 7,465 employees to the engineering unit and another 10,481 to the ground handling unit. This will take Rs931 crore and Rs600 crore in salary payments, respectively, off the Air India’s books.
The formation of the SBUs will need approval from the Union Cabinet. “We are pushing and want it to happen soon,” one source said.
As per a turnaround plan of AI, which has been vetted by Deloitte Touche & Tohmatsu, the auditing firm and consultant, the airline is expecting a significant reduction in staff expenses in this financial year because of the proposed spinoff.
“The staff number is expected to increase thereafter, in line with increase in volume of operations. The wage rates are also expected to increase 4% every year based on provisions of the agreement,” Deloitte said.
30/05/11 Sindhu Bhattacharya/Daily News & Analysis
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