Bangalore/Mumbai: State-owned carrier National Aviation Co. of India Ltd, or Nacil, which operates flag carrier Air India, has dumped its plan to restructure a deal to buy Airbus A320 planes from European plane maker Airbus SAS, and will stick to its original plan of inducting 15 planes by the end of 2010.
“Air India had asked us for a plan for restructuring. We presented (the proposal). But they decided on the initial plan,” Kiran Rao, executive vice-president for sales and marketing at Airbus, said in an interview on Wednesday.
An Air India spokesperson confirmed that his carrier was not cancelling or delaying the delivery of any Airbus planes.
Status quo: An A320 model at the Airbus factory in Toulouse, France. Gilles Bouquillon / Bloomberg
State-run Air India is expecting a bailout from the government to the tune of Rs15,000 crore and has committed to overhaul its operations and restructure debt of Rs15,241 crore. Its accumulated loss through fiscal year 2009 was at least Rs7,200 crore.
As part of the effort to turn around the company and cut costs, Air India had held talks with aircraft manufacturers to lower their prices.
“The idea was to defer the deliveries of the planes. One of the suggestions was to cancel some of its orders. The talks are progressing to have optimized fleet, which will also reduce the financial burden. But nothing has been finalized yet,” said a person familiar with the airline’s turnaround plan.
In 2005, Air India had placed an order for 111 aircraft, 43 from Airbus and 68 from rival Boeing Co.
As part of the turnaround plan, Air India had proposed to launch a low-fare carrier with an all-economy-class configuration.
“All 320 will go as two class (or business and economy configuration) as of now,” Rao said. This decision indicates that Nacil’s plan for an all economy or budget class fleet could be delayed.
“We are now converting our older planes into all-economy class rather than new ones. We will (be) starting our low-fare and all-economy class services on the international routes starting from October,” an Air India spokesperson said.
“We have not taken a call on our low fare operations on the domestic routes,” he added.
Air India had been originally planning to start all economy services on the domestic routes by this month.
“Interestingly, the civil aviation market is showing some revival signs. So it makes sense not to cancel or delay the deliveries of planes. Because once you defer or cancel your planes, you will lose out an opportunity when the market is on upside,” said an airline expert who did not want to be named.
Some 25,000 new passenger and freighter aircraft valued at $3.1 trillion (Rs149 trillion) will be delivered from 2009 to 2028, according to Airbus’ latest Global Market Forecast released on 17 September.
Of this, around 10,000 planes would be replacements of existing aircraft globally. Nearly a third of the new demand would come from India and China.
India’s passenger market will grow the fastest at 10% a year over the next 20 years followed by China at 7.9%, Airbus said.