Tuesday, January 07, 2020

Air India Engineering Subsidiary expansion plans hit by capital crunch: CEO

Mumbai: Capital crunch has grounded the expansion plans of Air India''s engineering arm AIESL, which gets almost 90 per cent of the revenue by maintaining the flag carrier''s fleet, according to its CEO H R Jagannath.
Air India Engineering Subsidiary Limited (AIESL), the loss-making subsidiary, requires at least Rs 1,000 crore capital infusion to help it undertake some 20-30 more component overhaul jobs, which are currently being outsourced to international players, Jagannath said in an interaction on the week-end.

Set up in 2013 as a separate subsidiary, AIESL provides maintenance repair and overhaul (MRO) services, both line and major maintenance, to various type of aircraft of Air India group''s 170-aircraft strong fleet besides to third party airlines as well as the defence forces.

However, with the government set to privatise Air India, the company may lose the bulk of its business but Jagannath is confident of retaining it from the new investor because of the service "quality and lower cost."

"We require good amount of cash. The MRO business is capital intensive. Air India is supposed to give me Rs 1,000 crore. But since the airline itself is facing a cash crunch, we have not been able to get these funds.

"Had the company got this money, we would have set up at least 20-30 components overhaul facilities in-house, a business which is now going out of the country," he said.

Jagannath said that the domestic MRO market stands at around USD 1.2-1.5 billion with maintenance cost of the Indian airline accounting for almost 8-15 per cent of the total cost.
06/01/20 PTI/Outlook
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