Air India plans to hire 10 midsize A330s, lease out six Boeing 777s

Air India plans to hire 10 midsize A330s, lease out six Boeing 777s

Mumbai: Faced with rising maintenance costs and a delay in delivery of aircraft, state-run Air India is looking to lease out six of its large Boeing 777 aircraft as well as hire at least 10 midsize Airbus A330 planes. A final decision will be taken in a month after a government committee finishes studying the proposal.

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Chairman and managing director Arvind Jadhav confirmed there is a proposal from the airline’s engineering department asking for midsize aircraft, given delays in the delivery of Boeing 787s, which were supposed to replace old Airbus A310 aircraft that are being phased out.

“This proposal is referred to a committee headed by additional secretary and financial adviser in the ministry of civil aviation… It is expected to give its report in a month’s time," Jadhav said.

“At present, the maintenance cost of old A330s is high. Since we cannot buy the planes, we could look at short-term leases for new planes that will lower the maintenance cost as well as retain the market," said Jadhav, adding that Air India has asked US aircraft maker Boeing Co. for compensation for the delays, without disclosing details.

A civil aviation ministry official, speaking on condition of anonymity, also confirmed the development, adding that “the same committee that was set up in 2004 for fleet acquisitions will look into the proposals". Both Jadhav and the ministry official declined to divulge details of the new orders.

Dinesh A. Keskar, president of Boeing India and vice-president of Boeing International, declined to comment on Air India’s leasing plans, or on the compensation demands.

The airline’s move stems largely from a delay in delivery of Boeing 787, leading to difficulties in Air India retaining its current market in the large carrier space. Also, the decision to replace old aircraft such as A310s and A330s is to lower maintenance costs.

A Boeing 777 can seat up to 365 people, while the Dreamliners have a capacity of 250 passengers. The A330 can seat up to 290 people.

Air India was scheduled to get its first of 27 Boeing 787s, popularly known as Dreamliners, in September 2008, but delivery has been pushed back to the second quarter of calendar year 2011.

The government official quoted earlier said the carrier will only take a final decision on the leasing moves after it works out the cost, availability, internal rate of return and other operating terms of an alternative aircraft in the event that the Dreamliner is delayed further, or even to serve the current markets.

An Air India executive said on condition of anonymity that there was no harm in preparing a Plan B since the airline has already lost almost two years.

Some analysts say leasing more planes will add to Air India’s current debt of Rs18,000 crore. In 2007, the flag carrier had embarked on an ambitious fleet acquisition, buying 111 aircraft—43 from Airbus SAS and 68 from Boeing—worth $11 billion (Rs50,710 crore today).

Others, however, say that the carrier needs midsize wide-body aircraft to fly to destinations such as Singapore, Tokyo and Hong Kong, pointing out that the Boeing 777s are too large for those routes and would be under-utilized on seat occupancy, while adding to jet fuel costs.

Given that the Dreamliners are delayed and A310s are getting older, the carrier needs a better aircraft in the interim period, said V. Thulasidas, former chairman and managing director of Air India.

“Dreamliners are ideal to replace A310s since it is midsize in the category of wide-body planes. If Air India uses Boeing 777s instead of A310s, the performance will be suboptimal," said Thulasidas, now a consultant to various aviation projects of the Kerala government, adding that even A330s would be a good interim arrangement until delivery of the Dreamliners starts.