Friday, January 28, 2022

Govt cancels lease pacts of 21 Boeing Dreamliners

The government has terminated expensive sale and leaseback agreements of 21 Boeing Dreamliner 787 planes of Air India, paying the entire outstanding lease payments plus penalties for premature termination, two people in the know told ET.

The aircraft will now be owned, instead of being leased, by Air India, as the Tata Group takes over the airline.

Under a sale and leaseback (SLB) agreement, an airline sells its plane to a lessor for a premium and leases it back.

"The lease agreements were very costly," said one of the persons. "Also, the pandemic has made aircraft cheaper and the underlying leasing rates more feasible. Now, of course, the Tatas will have to ink fresh SLB agreements, if they want to do so."

Air India has 27 Dreamliners in its fleet. Six of them were already owned by the airline.

The Tatas plan to refurbish revenue management of Air India, focus on ancillary revenue and cargo, rework engineering and fuel supply contracts, and even those with travel agents, one of the sources said.

However, there has been no decision on adding to the airline's fleet, another person said.

The Tatas are getting Air India on a clean slate with dues to almost all vendors and suppliers have been paid, a person in the know said. The latest of payments was the clearing of ₹1,300-crore worth of arrears to employees, the person said.

Air India's debt was ₹61,562 crore on August 31, primarily raised on sovereign guarantees to fund its losses. The airline's accumulated losses at the end of March stood at ₹83,916 crore. The Tatas will also need to get 20 grounded planes flying and spend an average of $3 million each on several aircraft to refurbish them.

28/01/22 Anirban Chowdhury/Economic Times

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