Home >Companies >Paramount may buy 8 turboprop planes for up to $250 million

Mumbai: Chennai-based full business class airline Paramount Airways Ltd could be the only Indian carrier to place orders for planes at the five-day Dubai Air Show that ends on 19 November. The airline plans to sign an agreement to buy at least eight turboprop planes at an estimated cost of $230-250 million (around Rs1,070-1,163 crore).

Turboprop planes are manufactured by Canada’s Bombardier Inc. and Airbus SAS subsidiary ATR.

These small planes, with seat capacity ranging from 40 to 70, will be deployed to connect smaller cities such as Cooch Behar (West Bengal), Agatti (Lakshadweep Islands), Salem and Tuticorin (both in Tamil Nadu). Bigger planes in Paramount’s fleet, including five Embraer aircraft made by Brazil’s Empresa Brasileira de Aeronáutica SA, cannot land on the airport runways in these cities.

“The carrier is evaluating options between Bombardier’s Q400 and ATR’s 600 series of turbo planes. Initially we would be leasing eight turbo planes and (they) would be later replaced with new ones. The new planes would join the airline’s fleet between January and May," said a senior Paramount Airways executive, who didn’t want to be named.

“These planes will be having all business class configuration like the existing Embraer planes. The funding for these planes would be done with the help of European credit agencies," the executive added.

Paramount Airways found itself in a controversy after lessor GE Commercial Aviation Services (Gecas), an arm of General Electric Co. (GE), asked India’s aviation regulator, the Directorate General of Civil Aviation (DGCA), to deregister three Embraer jets after the airline defaulted on payments for the aircraft.

A second Paramount Airways executive, who also didn’t want to be named because he is not authorized to speak to the media, said his carrier had settled the issue with Gecas. Mint could not independently verify this and could not contact Gecas immediately over the weekend.

On 19 July, the carrier signed an agreement at the Paris Air Show with Airbus to buy 10 A321 passenger jets with an option to buy 10 more, the biggest order placed by an Indian airline firm in about two years.

Indian domestic carriers have been burdened by losses in the face of high costs and excess capacity.

“It makes sense for Paramount Airways to grow its fleet. Also, turboprop planes do not attract landing, parking and navigation charges at Indian airports. Besides, the sales tax on such planes are as low as 4%," said Mahantesh Sabarad, senior analyst with domestic brokerage Centrum Broking Pvt. Ltd.

However, Sabarad, who tracks listed airline stocks, said he is not sure about the business model for these new turboprop planes as “travellers of these small cities will not opt for turboprop planes to get comfort of business class".

“Turboprops will not be having that appeal for flying business class. Hence, the airline may have to tweak the business model to explore opportunity to have more passengers," Sabarad said.

The websites of the aircraft manufacturers claim that both the Q400 series aircraft of Bombardier and ATR 600 series are fuel-efficient and have low greenhouse gas emissions.

If bought, Paramount Airways will have two types of aircraft in its fleet. “We have no plans to phase out Embraers. The reason behind opting (for) turboprops is because certain smaller markets demand smaller planes and there are operational restrictions at these smaller airports," said the second airline executive cited earlier.

“There are several airlines in the country and world that are having multiple types of aircraft. The aircraft types are determined by the market conditions," he said.

With five planes, Paramount Airways, which was launched in October 2005, flies to 16 destinations across India and operates 72 flights daily, carrying 3,600 passengers. According to DGCA, the carrier had a 1.5% market share in October.

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