AIESL disinvestment in a couple of months: Secretary of Civil Aviation
Civil Aviation Minister Rajeev Bansal said on Tuesday that despite being a large country, India does not have the capacity to manufacture commercial aircraft, and this was one of its “biggest failures”.
Last month, Air India placed an order for 470 aircraft: 250 from European aircraft manufacturer Airbus and 220 from US giant Boeing. Although this is the world’s largest purchase of aircraft in one tranche, all of these aircraft will be built in Europe and America.
On the other hand, the China State Commercial Aviation Corporation of China (COMAC) delivered the first domestically produced C919 commercial aircraft late last year. The company said it had received 1,200 orders for the aircraft.
“We, despite being a large country, do not have the ability to produce our own aircraft, and this is one of our biggest failures. The Minister (Minister of Civil Aviation Jyotiradithya Scindia) mentioned this yesterday,” Bansal said at the CAPA India 2023 Aviation Summit.
He called India’s inability to manufacture commercial aircraft a “huge pain point”.
During the summit, Bansal also said that the government expects to complete the withdrawal of investment from India’s largest aircraft maintenance, repair and operation company AI Engineering Services Limited (AIESL) within a few months, and this will attract expressions of interest “very soon.”
“We are in the process of withdrawing investment from AIESL, the largest MRO in India. This is a good MRO. I was lucky to lead it. He is no longer at a disadvantage. It has a healthy top line and bottom line too. I think once this investment cut happens, hopefully in a couple of months, it will bode well for the Indian aviation industry,” Bansal said.
The Minister of Civil Aviation said that the AIESL divestment process is currently at an “advanced stage”. He added that the government had already held a road show to attract potential investors.
According to Bansal, a group of secretaries approved AIESL’s investment cuts and the matter is now under consideration by Air India’s Ad Hoc Alternative Mechanism (which is a ministerial commission).
The government sold Air India to the Tata group in October 2021.
However, Air India’s three subsidiaries – AIESL, AI Airport Services Limited (AIASL) and regional airline Alliance Air – were not involved in the deal. Now the government has initiated the process of selling these three enterprises.
During the summit, Bansal outlined three major challenges facing India’s aviation sector. First, the lack of a major maintenance and repair facility in India, forcing airlines to ship their aircraft, engines and parts overseas, which is both time and cost intensive.
Secondly, the need to develop world-class infrastructure, in which India lags behind. And finally, the lack of aircraft and engines, despite the high demand, is a serious problem for the industry.
There are currently about 22 Go First and 34 IndiGo aircraft on hold due to delays in the delivery of engines by Pratt and Whitney.
We have discussed this issue with the engine manufacturers at the highest level. Our minister spoke to them. We asked them to send supplies to us, as a large number of our aircraft are on the ground, which hinders the development of the sector. They are looking into it and will respond this week,” Bansal told reporters.
And this applies not only to engine manufacturers.
Boeing and Airbus are also having trouble keeping up with the aircraft delivery schedule due to supply restrictions etc.
Bansal said: “We have reached out to large OEMs (original equipment manufacturers that make aircraft, engines, etc.) to support our growth. Today in our country there is a demand, but there is no supply. Our carriers are in demand among consumers. The rates are very high. Aircraft and engine manufacturers cannot supply aircraft and engines.”
Regarding the implications of Air India’s privatization, he said that there is no airline in India that is sized to match its size and needs.
“If it (Air India) had remained with the government, the airline would not have been able to accommodate about 470 aircraft,” he said.
Privatization also provided a level playing field for other carriers. Otherwise, it was a state carrier, where the sovereign (government) constantly pumped out money. And therefore, it was not a level playing field for other players,” he added.
He said that two cities – Delhi and Mumbai – will receive their second airports within the next year. In addition, airports in Delhi, Bangalore, Hyderabad, Chennai and Kolkata are also expanding as demand grows.
“Together at the six major airports, we have a capacity of about 320 million people… I think as we move forward, we should look to these six airports to have a capacity of 500 million people,” Bansal said.
He also said that a consultation paper had been issued to increase fees for smaller airports.
“The consultation paper is out… We hope to finalize it in the coming weeks. All smaller airports are losing money and we need to keep a reasonable ROI for them,” he added.