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.
"The maintenance cost depends on the age of the aircraft. The lower the age, the lesser the maintenance cost," he said.
He said while Air India group's entire fleet is maintained in-house, the private domestic carrier's are forced to send out their aircraft to MROs in countries like Dubai, Singapore and Malaysia for want of certain component overhaul facilities in the country despite higher cost.
"I am discussing with SpiceJet, which is ready to give me all their maintenance jobs. We are negotiating rates with them," he said adding IndiGo is ready to give its planes to AIESL for replacing all four landing gears.
AIESL already has a contract with SpiceJet for maintenance of its aircraft at Thiruvananthapuram.
He said thatthe company's Nagpur MRO requires another around Rs 100 crore to make it fully functional.
AIESL has six MRO facilities across Mumbai, Delhi, Nagpur, Hyderabad, Kolkata and Thiruvananthapuram, along with engines shops and landing gear maintenance facilities.
The Air India Specific Alternative Mechanism (AISAM) has approved re-initiation of process for the government''s 100 per cent stake sale in Air India along with Air India Express and the airline's stake in AISATS.
The Government is expected to issue Expression of Interest for AI sale in this quarter.
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