AI economics: Sell cheap and pay more for lease

Mumbai: When it comes to the aircraft sale and leasing policy of the national air-carrier Air India, it looks like penny wise and pound foolish.
The state-run airline during 2007 and 2008 had sold eight of aircraft to raise working capital and other requirements, but had to lease all of them back to maintain the normal flight schedules. But the problem was that it sold cheap and leased them back at a premium.
For instance, in March 2007 it sold seven aircraft from its fleet for just Rs USD 126 million or Rs 630 crore, and soon leased all of them back at USD 2.6 million or Rs 1.34 crore for each aircraft for a seven-year period.
Again in April 2008, it sold yet another aircraft for USD 25 million or Rs 125 crore and took back the same aircraft on lease at a monthly rental of USD 3.1 million (Rs 1.55 crore) again for a seven-year period.
But the ailing airline would be paying over Rs 880 crore, Rs 125 crore more than the price it realised by selling them by the time it pays back the planes ater the seven-year lease is over, according to official documents.
As revealed by the airline in response to an right to information application, Air India had sold seven of its A320s for USD 126 million (Rs 630 crore) in March 2007.
21/10/09 PTI/Economic Times

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