Mumbai: State-run Air India Ltd is set to take delivery of its first Boeing Co. 787 Dreamliners this month, pinning its hopes on the new planes to revive its fortunes, with a recent strike adding to its financial woes amid dwindling market share.
“Air India will take delivery of three Dreamliners in August and the remaining by March 2016,” said a senior Air India executive, on condition of anonymity. It will have six by December and eight by the end of March, he said.
More than 60 pilots are being trained to fly the aircraft, he said. Apart from that, “over 100 technical staff are being trained and approved. Most of the spares and tools are ready to handle the Dreamliners”, he added.
Air India placed orders for 27 Dreamliners six years ago and was supposed to take the delivery of the first of them in September 2008 and the rest by October 2011. However, the deliveries were delayed due to design and production hurdles at Boeing.
Cost effective: According to the Boeing website, the 787-8 Dreamliner will carry 210-250 passengers on routes of 14,200-15,200km, while using 20% less fuel than airplanes of a similar size. (Christopher Furlong/Getty Images)
On 3 August, the cabinet committee on economic affairs permitted Air India to commence taking delivery of the Dreamliners it had ordered after signing a compensation settlement agreement for the delays with Boeing.
According to a senior official at the ministry of civil aviation, who requested anonymity, Boeing has agreed to a three-way compensation, including credit memos, certain concessions for pre-delivery payments for buying planes and cash.
Air India, which had placed an order for 27 Dreamliners, will be getting the first three dreamliners only in August this year
“We have entered into a confidentiality agreement with Boeing on the compensation agreement. Under the compensation agreement, Boeing has agreed for certain escalation benefits where prices of the planes would be fixed as per the original contract,” he said, declining to divulge details.
Mint could not contact Boeing India president Dinesh Keskar for comment. An email sent to him remained unanswered.
On 4 August, Keskar told Bloomberg that Air India will start preparing to take its first 787 Dreamliners next week.
The new planes allow the airline to save on cost. A Boeing 787 costs around $210 million (Rs 1,165 crore), while a Boeing 777 is around $260 million at list prices. And even though the Dreamliner is smaller than a Boeing 777, it is more fuel-efficient. According to the Boeing website, the 787-8 Dreamliner will carry 210-250 passengers on routes of 14,200-15,200km, while using 20% less fuel than airplanes of a similar size.
A Boeing 777 plane can seat 365 passengers and fly up to 14,685km.
Air India is, in fact, planning to sell five of its Boeing 777s, according to the executive cited above. “The Dreamliners will immediately replace Boeing 777 planes on some of the key routes such as London, Europe, Far East, South-East Asia and West Asia,” he said. “These routes are uneconomical at present due to the wrong choice of planes. Dreamliners will straight away reduce 20-30% fuel cost and we are expecting to generate a cash surplus on loss-making routes.”
A second Air India executive said the Dreamliners will initially be deployed on domestic metro routes to gain experience and will subsequently be deployed on international routes.
Analysts are sceptical about Air India being able to dig itself out of a financial hole with the new plane.
“The Dreamliner needs to be seen in the proper perspective. So much is so very wrong with Air India that no single event, howsoever important, can radically transform Air India’s fortunes overnight,” said aviation expert and aerospace journalist Hormuz P. Mama.
It needs to be emphasized that the Dreamliner is a quantum leap over earlier-generation aircraft in terms of the economics of operation due to its extremely low fuel consumption as well as its very high maintainability and reliability, he said.
“It will also offer altogether higher standards of passenger experience. To that extent, the Dreamliner will certainly improve Air India’s competitive position. Selecting the Dreamliner was a very good move, and Air India, as an early customer, had received very attractive terms,” Mama said.
Inder Sethi, a former deputy managing director and commercial director (1957-80) of Air India, questioned the need for adding “27 very expensive aircraft to its fleet as it already has a number of aircraft sitting idle and has had no success in trying to dry lease some of its 777 aircraft”.
“Are we going to see some more long layovers at outstations such as New York and Newark, where the aircraft sits on ground for many hours? Or will these aircraft be farmed out to adorn the landscape of Indian airports?” Sethi said.
According to industry standards, the optimum utilization of long-haul aircraft is around 14 hours daily. Sethi said Air India has been struggling to increase the utilization rate of the Boeing 777 beyond 10 hours. He also raised concerns over the airline having enough qualified pilots and support staff for the Dreamliner.
In April, the government approved a Rs 30,000 crore package to bail out the loss-making carrier. It included an upfront equity infusion of Rs 6,750 crore and assured equity support of Rs 23,481 crore till 2020-21.
Air India had debt of Rs 43,777 crore as of 31 December. It has accumulated losses of Rs 27,000 crore in the past five fiscal years. The government has approved a restructuring plan involving Rs 21,348 crore of short-term loans to help the airline stay afloat.
A 58-day strike by pilots resulted in a Rs 200 crore revenue loss for the carrier. The strike started with the demands of some pilots that Dreamliner training be restricted to pilots from the erstwhile Air India that merged in 2007 with state-run Indian Airlines to form a new entity called National Aviation Co. of India Ltd, which was later renamed Air India Ltd.
The first delivery of the 787 to All Nippon Airways took place on 25 September 2011. The plane’s record hasn’t been blemish-free—one of the General Electric Co. (GE) engines of a Dreamliner at Charleston airport failed before a test flight. The engine involved in the July incident has been removed from the plane and sent for forensic tests to a GE factory in Cincinnati. GE, Boeing and the US National Transportation Safety Board are investigating the case.
Meanwhile, Jet Airways (India) Ltd, the country’s largest carrier by passengers carried, is also considering the sale of some of its 777s as the airline is unable to deploy the aircraft profitably.