New Delhi: Air India Ltd is likely to leave the decision to buy nearly $4 billion worth of Boeing Co.’s Dreamliner 787 aircraft to the government, emphasizing that while it needs the aircraft to stay competitive, the purchase has to be funded by the state.
Air India’s board met on Thursday in New Delhi to decide on the fate of a 2005 order for 27 Boeing 787 aircraft that is expected to arrive from December after much delay.
“The company officers recommended that Air India does not have a replacement aircraft for that category and if it doesn’t take it, it will be the end of the firm. Now fundamentally, we cannot take a stand on it as almost all the money for this needs to be given by the government,” said a government official familiar with the matter, who declined to be named.
A medium-haul aircraft like B787 or Airbus A330 can fly to Europe where Air India is currently flying long-haul Boeing 777.
The carrier makes Rs 38 crore in daily revenue. Its expenditure is about Rs 55-60 crore out of which Rs 7 crore is for repayment towards Boeing and Airbus aircraft it bought in 2005. This payment will escalate further when the Dreamliner aircraft joins the fleet. To be sure, the aircraft funding is already tied up at cheap interest rates through the Export-Import Bank of the US.
The airline in a statement said its August performance has improved from a year earlier. Passenger revenue increased from Rs 889 crore to Rs 998 crore, an increase of 12.3%, occupancy increased from 64.3% to 73.1% on domestic sectors and on the network from 67.7% to 70.3%.
A panel of officers mandated by a group of ministers is looking into a viable turnaround plan for Air India based on which the airline may get funds from the government. Induction of the Dreamliner aircraft constitutes a significant part of the turnaround plan, said the government official. But, he said, the government may decide to buy just 14 planes instead of the originally planned 27.
“That’s one of the options being seriously looked at by the group of officers,” he said.
A second government official said Air India’s views will be sent to the panel of officers, who will decide on the final turnaround plan and submit the report to the group of ministers as deemed fit.
The final decision on Dreamliner may, therefore, take a while. The Pranab Mukherjee-led group of ministers may meet in October because of tight travel schedule of the finance minister this month.
On Thursday, Air India also ratified the induction of its new chairman and managing director Rohit Nandan to the airline’s board and thanked the former chairman and managing director Arvind Jadhav for his “outstanding services” which were “applauded by the board.”