On July 1st Air India and Singapore Airport Terminal Services Limited (SATS) commenced their joint venture handling airport ground services for foreign airlines at India’s Thiruvananthapuram International Airport (TRV), adding onto the two company’s existing ground handling joint ventures at Hyderabad International Airport (HYD) and Bengaluru International Airport (BLR).
The joint venture, Air India SATS Airport Services Private Limited (AISATS), was established in May of 2011 and was expected to begin operating on July 1st. As Air India has been seeking new opportunities to expand its business and drive revenue for the financially crippled airline, it is a good sign than this ground handling joint venture commended on schedule on July 1st as scheduled.
Now, as the ground handling services of the AISATS is operating smoothly, just 11 days after service commenced at Thiruvananthapuram International Airport, there appears to be an issue that can permanently disrupt this financially beneficial business venture …
… E.K. Bharath Bhushan, of Air India’s Board of Directors and India’s Director General of Civil Aviation, has stated “this was not approved by the Air India board but don’t ask me how it has already started functioning at the international airport here,” upon arriving at Thiruvananthapuram International Airport and learning of the joint-venture.
While Air India’s Board of Directors is stating that the ground handling joint venture was not approved by Air India’s Board of Directors, Singapore Airport Terminal Services Limited has released that details of the joint venture were publicly disclosed on the 12th of May, 2011, at 19:06:55 SST.
The following information was released on the evening of May 12th, through a non-mandatory Acquisitions and Disposals memo that was sent to SATS investors:
SATS Ltd. (the “Company”) wishes to announce that its associated company, Air India SATS Airport Services Private Limited (“AISATS”), has increased its issued and paid-up capital from 100,000 Rupees to 80, 939, 950 Rupees, by way of an allotment of:
(a) 40,419,975 shares of 10 Rupees each fully paid, for cash at an issue price of 10.79 Rupees per share (or an aggregate issue price of 436,131,530.2 Rupees), to the Company; and
(b) 40,419,975 shares of 10 Rupees each fully paid, for cash at an issue price of 10.79 Rupees per share (or an aggregate issue price of 436,131,530.2 Rupees), to Air India Limited.
Following the allotment of the additional shares, the percentage shareholdings of the Company and Air India Limited in AISATS remain unchanged at 50% each.
The above transaction is not expected to have any significant impact on the net tangible assets and earnings per share of the Company for the financial year ending 31 March 2012.
None of the Directors or controlling shareholders of the Company has any interest, direct or indirect, in the above transaction, other than through their respective interests (if any) in the Company.
Air India is a complicated company, one that is constantly involved with internal battles and political struggled, all of which are leading to financial disaster … but agreeing to and establishing a joint venture, that is successfully operating, without the approval of the Board of Directors is a whole new level of miscommunication, even for Air India.
The fate of the newly formed Air India SATS Airport Services Private Limited joint venture is now unknown and should Air India seek to dissolve this business unit, everyone loses.