Cost in development of KG Basin not overstated: RIL
Dot.com flashback: AOL chief mulls merger with Yahoo

Corporate Sep 9, 2011

Air India to review orders for Boeing planes in wake up poor finance

New Delhi: Air India may review the delivery of 30 aircraft, including 27 Boeing and 787 aircraft which are yet to be delivered, in the wake of its poor financial condition.

"So far, only 20 of 50 wide-bodied aircraft have been delivered to Air India. The issue of remaining 30 wide-body aircraft for acquisition will be assessed in light of current financial situation of the company," an official said here.

An unnamed official said," The ailing airline does not have the money to pay and we cannot go begging all the time".Reuters

The ailing airline does not have the money to pay and "we cannot go begging all the time. It is difficult", the official, who did not wish to be identified, said. There were 27 Boeing 787 aircraft to be delivered but it has been delayed by three years. So, the government has not confirmed (the orders) as of now, officials said.

The statement came in the backdrop of the report of the Comptroller and Auditor General, which castigated the government for placing big aircraft orders, the merger of the two state-owned airlines and on other issues.

Air India had ordered acquisition of 111 aircraft, of which 27 were Boeing 787s long haul wide-bodied aircraft. The American aircraft manufacturer was supposed to have delivered the 787s by 2008, but due to delays caused by several factors including a strike by Boeing workers, the first of these planes are likely to be inducted by Air India this year-end.

As of March, Air India has accumulated a debt of Rs 42,570 crore and an operating loss of Rs 22,000 crore.

The CPI-M said the Comptroller and Auditor General (CAG) has held the Ministry responsible for increasing the number of Boeing aircraft to be acquired by erstwhile Air India from 28 to 68 in 2004 in a hasty manner.

"The purchase agreement was signed with Boeing in December 2005 for Rs 33,197 crore. This arbitrary expansion of the acquisition plan, financed by loans, has been a significant factor behind the sharp increase in AI's debt burden," it said.

Holding Civil Aviation Ministry responsible for pushing erstwhile Indian Airlines for acquisition of 43 aircraft from Airbus for Rs 8,399 crore in February 2006 with undue haste, it said the large acquisition was clearly driven by influence of the MoCA, ignoring the concerns of several officials on the financial viability of such large-scale acquisitions.

Had the merger taken place before the separate acquisition of aircraft, a common acquisition process would have saved significant revenues for the airline, it said. The policy on bilateral entitlements for international operations was substantially liberalised from 2004-05 onwards, the CPI-M said, adding it benefited big international airlines like Emirates to access the Indian market without any reciprocal benefit to AI.

The CPI-M said the CAG report confirms the findings of Parliamentary Committee on Public Undertakings (CoPU) which noted in its March 2010 report that "the merger of Indian Airlines and Air India was an ill-conceived and erroneous decision.

CoPU also called for a review of route and slot allocations to airlines in the backdrop of reports "about the public carriers being disadvantaged by the allocation of prime commercial routes to private airlines such as Jet Airways, Kingfisher Airlines and Emirates and also the allocation of time-slots on common routes in such a way that the private carriers would get the bulk of passengers on such routes," the party said in the statement.

PTI

Related Stories.