New Delhi: Some months ago, Civil Aviation Minister Ashok Gajapathi Raju squarely blamed his predecessor Praful Patel for the financial mess in which Air India finds itself. Now, the airline under his watch appears to be headed on a similar flight path. The United Progressive Alliance (UPA) government's decision to buy 111 long-range aircraft for a staggering Rs 51,000 crore loaded the flag carrier with accumulated losses of Rs 31,000 crore. In October, Mr Raju, as minister of the National Democratic Alliance government, told a local daily that buying over 100 aircraft did not make commercial sense. Yet, just five months later, Air India says it is planning to buy five Boeing 787-9, an upgraded version of the 787-8 Dreamliner, at a cost of nearly Rs 8,000 crore, scheduled for delivery in 2017. This is an incredible decision for several reasons. For one, the airline, already on a Rs 30,000-crore equity infusion from the government, clearly cannot afford to splurge; if anything, it needs to accelerate cost-cutting plans. The saga of the 787-8 Dreamliners is a case in point. Currently, the airline has taken delivery of only 20 of the 27-aircraft order, owing to several technical glitches (this order would be completed only in mid-2016). Of these 20 aircraft, 11 were sold and then leased back as a cost-saving exercise. Meanwhile, Air India was clearly struggling with other aircraft purchases; early last year, the airline sold eight Boeing 777 to Etihad Airways at reportedly one-third its 2004 price.
08/04/15 Business Standard
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08/04/15 Business Standard
