Air India will hive off its ground handling and maintenance operations into two separate subsidiaries, as part of its plan to turn around the ailing carrier.
The Indian government has approved a plan to launch two subsidiaries, Air India Transport Services Ltd (AITSL) and Air India Engineering Services Ltd (AIESL) from 1 February, says a spokesman for the flag carrier.
Air India will provide Indian rupees (Rs) 3.75 billion ($70 million) to AITSL over three years and Rs3.93 billion over 12 years to AIESL in capital expenditure. The carrier will then receive royalties from the revenue of the two subsidiaries.
The airline had been planning to separate the two subsidiaries since 2011 as part of a wider restructuring aimed at turning around the loss-making airline, but has only now been given government approval to do so.
The Indian government announced in January that it was convening a committee to deliver recommendations to cut costs and boost utilisation at Air India after it was revealed that the carrier was projected to be losing Rs4 billion per month.