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Air-India touches down on Boeing deal

Mumbai, Jan. 11: The country’s largest plane deal, worth $11.8 billion, took wing today when Air-India signed up for 68 aircraft from Boeing after months of talks.

On the dotted lines were the signatures of Air-India chief V. Thulasidas and Boeing Commercial Airplanes CEO Alan R. Mullaly.

The transaction has come a long way from April last year, when the A-I board had cleared purchase of 50 aircraft for $6.9 billion. Later, it was decided that more planes were needed and by December, plans to buy a total of 68 were approved. Only the price was to be fixed in talks.

The proposal was referred to the empowered group of ministers led by the civil aviation minister for details, including a possible price reduction. But neither Air-India nor civil aviation minister Praful Patel spelt out the final amount. “We received a discount of nearly Rs 1,000 crore,” said a source in Air-India. Large orders of this size usually fetch big discounts.

Air-India, which last bought an aircraft way back in 1996, has been facing intense competition from domestic private carriers like Jet Airways and Air Sahara, both of which can now fly overseas. Many international airlines, too, have scaled up their services to India.

“The positive economics of the 777s and 787 Dreamliners will offer Air-India operational cost savings and the flexibility to serve new ultra-long range non-stop routes to Europe and the US. This, together with the low operating costs of 737s, will give Air-India and Air-India Express competitive advantage,” said Thulasidas.

The order consists of 23 777s, including eight 777-200LR (longer range) Worldliners and 15 777 300 ER (extended range). Crowning the deal will be 27 787-8 Dreamliners. There will be an additional 18 next-generation 737-8000s for Air-India Express, A-I’s wholly-owned subsidiary.

“Deliveries will begin in 2006, except for the next-generation 787s, which will arrive only in 2008,” said Mullaly at a joint press conference with the Air-India chief after the two airlines had signed the agreement here today.

Civil aviation minister Praful Patel, also present at the occasion, said Boeing would invest $185 million in India and procure products and services worth $1.9 billion over 10 years. The Chicago-based firm will spend $100 million on a repair, maintenance and overhaul facility, $75 million on a pilot-training centre and $10 million on other units.

Mullaly said in the long term, Boeing will also try to identify Indian partners in design and manufacture of aircraft parts. “We are already working with Indian companies in some areas. We have entered into a deal with HCL Technologies for providing software for the 787s. There will be more in the pipeline,” said Dinesh. J. Keskar, senior vice-president (sales), at Boeing Commercial.

Boeing has pacts with Hindustan Aeronautics, the Indian Institute of Science, TCS and Wipro.

Spaced out

Air-India has 42 planes now. The 68 it ordered today will take the tally to 110. With airports being challenged for space, the question is where the carrier will park its fleet.

“We are building 145 parking bays across 43 airports in the country in 2006. The planes will not be just kept at Mumbai and Delhi airports but across India,” Patel said.

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