Air India grounds Dreamliner fleet7 min read . Updated: 18 Jan 2013, 08:50 AM IST
Move prompted by US Federal Aviation Administration halting the plane’s flights the day before
New Delhi: State-run Air India Ltd grounded its six Boeing 787 Dreamliners on Thursday after being ordered to do so by the country’s civil aviation regulator, a move prompted by the US Federal Aviation Administration (FAA) halting the plane’s flights the day before.
Regulators and airlines in Europe and South America also grounded the plane, which was first pulled from schedules in Japan on Wednesday following an emergency landing after instruments indicated a battery error. Poland’s state-controlled LOT Polish Airlines said it would seek compensation from Boeing Co. for grounding its two planes.
The fuel-efficient 787, which uses weight-saving composite materials, is a critical element of debt-laden Air India’s turnaround plan. The airline, in the midst of a government bailout programme, was Ebitda (earnings before interest, tax, depreciation and amortization) positive in November and December, on a stand-alone monthly basis. Ebitda is a measure of a company’s ability to generate income from its operations, and the turnaround came after Dreamliner deliveries to Air India began in September.
“There is no compromise on safety, even if it is minor or major," aviation minister Ajit Singh said. “Till a few days ago, at least 50 Dreamliners were flying. These planes had flown at least 50,000 miles. Since FAA had raised doubt about their batteries, we have asked Air India also to ground Dreamliners. DGCA (Directorate General of Civil Aviation) is in touch with Boeing, Air India and FAA."
The minister said it was too early to comment on the financial implications for Air India as “it all depends upon how long it will take to complete the testing and cost involved for corrections measures, if any".
Air India’s schedules won’t be affected, Singh said. It will use the Boeing 777 planes, which the Dreamliners had replaced, on the affected routes. Those 777s are still with the airline.
These planes will fly longer —12 hours a day against the typical seven hours a day—to minimize the revenue loss from the grounding of the Dreamliners, said an Air India executive requesting anonymity. The 787s are expected to be back in service shortly, the executive said.
In a statement, Air India said it is also “deploying its B747, Airbus 320, A-321 and A319 aircraft to make optimum use of its fleet and ensure no inconvenience to its passengers".
Late last year, the state-run airline’s chairman, Rohit Nandan, made clear how much its revival plan depends on the 787.
“Dreamliners are expected to achieve great performance levels at lower fuel costs maintenance and operating costs," Nandan told Air India’s 30,000 employees in a 12 December message. “From an operational aspect, too, the Dreamliner has the optimal size and range not only to operate Air India’s current routes more profitably, but also to open up new markets in Australia, Europe, the Gulf and South-East Asia."
The Air India turnaround strategy includes an equity infusion of ₹ 30,000 crore by 2021, which is conditional on the carrier meeting periodic targets. The carrier, which has a total 27 Dreamliners on order, envisages the extensive use of the 787 on overseas routes.
Air India is scheduled to take delivery of two more Dreamliner planes this fiscal year, six each in the next two years and the remaining seven in the following year.
Air India started Dreamliner long-haul operations on 15 October with a direct flight from Delhi to Frankfurt.
“We have to utilize these strengths to surge ahead of competition," Nandan said with reference to the 787. “And, in this endeavour, both machines and men will have to complement each other."
Dinesh Keskar, senior vice-president for Asia-Pacific and India sales at Boeing, said the 787 was “an airplane that will be the key focus of the airline’s turnaround plan" at the time of the first aircraft delivery.
The 256-seater aircraft has also been deployed by Air India on flights to Dubai, Paris and domestic sectors. Flights to the French capital were launched on 10 January. Delhi-Tokyo and Delhi-London were to have been launched within a month, according to a second senior Air India official who declined to be named.
Jitender Bhargava, a former executive director of Air India, who has previously been critical of the management, questioned the approval of a Paris flight, considering the glitches that have plagued the plane.
“They should have been more circumspect," he said. Besides that, “when Japan had grounded 787s, on what basis did DGCA allow AI (Air India) to fly Dreamliner after yesterday?"
A Boeing engineering team had visited Mumbai this month to monitor the 787 problems, said the Air India executive cited above. The manufacturer was providing spare parts support to help tide over any problems, this official said, adding that one of the six 787 aircraft was made a permanent standby in case there were any problems with the other five.
If the 787 stays grounded, Air India’s revenues are likely to be hit. The airline reduced its cash losses in the April-November period by ₹ 923 crores and registered an Ebitda profit of ₹ 18.27 crore in November, according to an Air India document reviewed by Mint.
“It remains to be seen how long the grounding lasts," Bhargava said. “All aircraft have teething problems...but here there are different problems with different aircraft."
Bhargava also pointed to criticism levelled against an increase in Air India’s demand for planes between January and August 2004 by the Comptroller and Auditor General of India (CAG).
“Clearly, there was a massive inflation of aircraft requirement...which is inexplicable," CAG had noted. It was also critical of the carrier for not using its planes more efficiently.
Director general of civil aviation Arun Mishra said on Thursday that Air India had been told to ground its planes. The order was issued after DGCA received reports from the US authorities last night on the aircraft’s defects.
A third Air India executive declined to elaborate on the possible loss due to the grounding of the fleet.
The US aviation regulator ordered a halt to all 787 Dreamliner flights on Wednesday after two incidents of smoking or burning batteries within two weeks. The use of new battery technology is among the cost-saving features of the 787, which Boeing says burns 20% less fuel than rival jetliners using older technology.
“FAA will work with the manufacturer and carriers to develop a corrective action plan to allow the US 787 fleet to resume operations as quickly and safely as possible," the US regulator said in a statement.
All US-registered Boeing 787 aircraft must be approved by the agency before they can resume flights.
The FAA move indicates that the electrical problems may be more critical than previously understood. Boeing chairman and chief executive Jim McNerney said in a statement that the company would work with FAA to find answers as quickly as possible.
“We will make available the entire resources of the Boeing Co. to assist. We are confident the 787 is safe and we stand behind its overall integrity," he said.
The Dreamliner has been plagued by multiple teething problems such as fuel leaks, electrical malfunctions and hydraulic problems, said Mohan Ranganathan, a safety analyst and member of the government-appointed Civil Aviation Safety Advisory Committee.
“The 787 is a fly-by-wire aircraft and it depends a lot on electronics and electrical systems," Ranganathan said. “The battery that failed is also the power source for fire protection of the engine."
The FAA order on a halt to Dreamliner flights is the first such action against a US-made passenger plane since the McDonnell Douglas DC-10 was grounded in 1979 after a deadly crash in Chicago, analysts said.
Boeing shares were down 2.1% on the New York Stock Exchange at 7.12pm local time.
“Ultimately, you can view it as a positive thing if they can resolve what the issues are and give people confidence in the safety of the aircraft. In the near term, though, it’s a negative. It’s going to force the company to make significant investments," said Ken Herbert, an analyst at Imperial Capital in San Francisco.
The 787, which has a list price of $207 million, represents a leap in the way planes are designed and built, but the project has been plagued by cost overruns and years of delays. Some have suggested Boeing’s rush to get planes built after those delays resulted in the recent problems, a charge the company denies.
Bloomberg contributed to this story.