Indian Airlines has signed a memorandum of understanding with Singapore Airport Terminal Services, part of the Singapore Airlines group, to undertake feasibility studies to set up a joint venture ground handling company in India.

This follows a similar memorandum of understanding on aircraft maintenance between Indian Airlines and SIA Engineering Company, a subsidiary of Singapore Airlines.

Indian Airlines is likely to have a 51 per cent stake in the proposed ground handling venture while the balance will be held by Singapore Airport Terminal Services.

The new company will offer ground handling facilities in 10 cities: Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Thiruvananthapuram, Bangalore, Kochi, Goa and Kozhikode.

Indian Airlines operates over 50,000 flights a year and there are over 10,000 international flights annually through the 10 airports.

Apart from taking over the ground handling activities of Indian Airlines, the joint venture could offer its services to other airlines.

The feasibility report is likely to be placed before the two boards within five months.

Singapore Airport Terminal Services is one of the leading providers of ground handling and in-flight catering at Singapore's Changi airport, handling over 24.5 million passengers.

The company has joint ventures and strategic alliances in over 14 international airports in the Asia-Pacific region.

Indian Airlines executives said Rs 170 crore (Rs 1.70 billion) would be needed just to change the airline's 20-year-old ground handling equipment.

According to preliminary estimates, Indian Airlines can save over Rs 67.5 crore (Rs 675 million) a year by outsourcing ground handling to the new company.

Experts reckon Indian Airlines' ground handling costs are Rs 45,000 per flight. But other domestic airlines say they have to fork out double that amount in some cities because they are dependent on third-party operators, sometimes the only players with surplus capacity to offer ground handling facilities in an airport.

Some of the private airlines, which undertake their own ground handling activities, say they spend around Rs 18,000-Rs 22,500 on ground handling per flight.