Tata-owned Air India is looking to partner with German aircraft maintenance giant Lufthansa Technik and French-Dutch airline Air France-KLM’s engineering unit to bid for AI Engineering Services Limited (AIESL), when it is put up for sale.
Singapore Airlines which holds a 25.1% stake in Air India will also be a part of the consortium through its engineering arm SIA Engineering Company Limited.
AIESL, the erstwhile engineering arm of Air India, which is now owned by the government, is the MRO (maintenance repair and operations) company that caters largely to Air India’s fleet. It’s ownership is important for Air India to ensure that it’s fleet of aircraft are smoothly run.
People aware of the development said that Lufthansa CEO Carsten Spohr had had multiple meetings with top executives of Air India and Tata Sons to finalise the consortium and deepen commercial ties with Air India.
A spokesperson of Lufthansa Technik said that company is closely evaluating the privatisation of AIESL to strengthen its presence in India. “India is a highly dynamic growth market and extreme growth of air traffic will drive up the demand for MRO services. We are already present and successful on the Indian subcontinent with our own facility for component services and taking a very close look at this development, to participate even more strongly in this growth market,” she said.
Queries sent to AFI KLM E&M, the engineering unit of Air France-KLM, went unanswered. Air India refused to comment on the issue.
AIESL is one of the four erstwhile subsidiaries of Air India, that are currently owned by the government, and that will be privatised. Government officials said that the Preliminary Information Memorandum (PIM) of AIESL is awaiting the approval of a panel of senior ministers headed by home minister Amit Shah Air India Specific Alternative Mechanism (AISAM). The approval will be followed by the government floating an Expression of Interest (EOI) document to invite bids from interested parties
The Tata group acquired Air India from the government last January. According to the terms of that deal, the government retained ownership of Air India’s engineering and ground handling units forcing the Tata group to develop in-house engineering capabilities for the airline and at the same time outsource work to AIESL.
Campbell Wilson, CEO of Air India had said that exclusion of AIESL from Air India has created a tough road ahead for maintenance and servicing of the airline’s fleet.
“What was one of the negative surprises with privatisation is that Air India’s engineering capabilities disappeared. AIESL will provide services till the end of next year. But what happens after that is a matter of deep consideration, given our expansion,” Wilson had said.
As part of the share purchase agreement entered between Tata Sons and the government, there is a lock-in period of three years during which Air India should continue its business with the ground handling and engineering unit.
“90% of our engineering work is currently being done at AIESL. So, to develop the airline’s in-house engineering capabilities, it makes sense to acquire AIESL,” an airline executive said, adding that the company hasn’t finalised the partners and structure of the consortium.
AIESL is India’s largest MRO provider, with an experienced workforce and has six hangar facilities across the country. It handled 450 aircraft in FY 22 clocking a profit of Rs 840 crore.
