Mumbai: Full-service airline Paramount Airways India Ltd, which currently operates in southern India, will buy at least 17 big planes from both US-based Boeing Co. and Airbus SAS of Toulouse, France, for about $1.5 billion (Rs6,015 crore) to fuel its international entry in 2011.
The Chennai-based airline, which has five Brazilian-made Embraer planes, is considering seven Boeing B787s, popularly known as Dreamliners, making it the third Indian customer of this plane after Air India and Jet Airways. Paramount Airways will also buy 10 of Airbus’ wide-body planes, including the A330 and A350.
“There is no harm in having a mixed fleet for international routes, such as Jet Airways and Air India,” said an analyst with an international brokerage, who asked not to be identified.
Some of these planes can fly non-stop to destinations in the US. Paramount, which started as an all-business-class airline, plans to connect to Europe, West Asia, South-East Asia and the US once it completes five years of domestic operations in October 2010.
As per current guidelines, carriers have to serve domestic routes for five years and have a fleet of 20 planes before flying to international destinations.
Getting bigger: A file picture of spectators at the launch of Boeing’s 787 Dreamliner jet in Everett, Washington. Chennai-based Paramount Airways is considering to buy seven such planes. (Kevin P. Casey / Bloomberg)
Mint reported on 9 February that Paramount was set to finalize the purchase of wide-body planes from Boeing or Airbus as it planned to start non-stop operations to the US and Europe after completing five years of operations.
The mixed fleet order will be supplemented with nearly a dozen options. When an airline confirms its purchase of aircraft, the manufacturer, through options, allows it to acquire additional aircraft later at an agreed price within a specified time.
A person close to the development said an announcement on the acquisitions is expected by early March, if the airline fails to conclude negotiations during the ongoing Singapore Air Show.
M. Thiagarajan, managing director of Paramount Airways, was unavailable for comment. However, in an earlier conversation, Thiagarajan had said the company was in talks with Boeing and Airbus for buying bigger planes.
The brokerage analyst said placing orders in advance made sense in the long term. “Delivery slots and options of wide-body planes are precious for any airline... Not only will it help an airline equip itself to start international operations, it can also sell slots and options to any other airline for a better agreed price in future,” he said.
Recently, Deccan Aviation Ltd, a subsidiary of UB Group that runs Kingfisher Airlines Ltd, sold two delivery slots of Airbus aircraft to another international corporate client.
Though the picture seems rosy, the funding of such planes will create a headache for the airline as it is struggling to make money in the overcrowded Indian skies.
Thiagarajan had indicated that he would be tapping European credit agencies for financing to buy Airbus planes and from the US Export Import Bank for the Boeings.
In 2006, Kotak Mahindra Bank’s private equity fund India Growth Fund (IGF) had picked up a 10% stake in Paramount Airways for $15 million.
It is not clear how the airline will manage to pay pre-delivery commitments to Boeing and Airbus, as it has plans to acquire more planes from Brazilian manufacturer Empresa Brasileira de Aeronáutica SA.
Paramount today connects Chennai, Madurai, Coimbatore, Bangalore, Hyderabad, Visakhapatnam, Kochi and Thiruvananthapuram, and will make its entry to western India by linking Goa and Pune from April.