The Telegraph
Since 1st March, 1999
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Selloff not to affect IA plane purchase

New Delhi, Aug. 22: The government is going ahead with the proposed purchase of 43 wide-bodied planes for Indian Airlines (IA) for Rs 10,050 crore, though the process could take time.

Plans to lease six Airbus 310s and three Boeing 747-400s for Air-India are also on track. “There have been no objections from the ministries of divestment or finance to the Indian Airlines’ proposal of raising a loan to buy these planes on the ground of a selloff in future. Divestment will not affect purchases and vice versa,” civil aviation minister Shahnawaz Hussain said.

However, officials said the civil aviation ministry was going slow on the purchase decision since it did not want to be accused of favouring a particular plane maker. The IA’s acquisition committee has already come out in favour of Airbus, but the government has to vet the choice and guarantee a euro or dollar loan for the purchase.

Hussain trashed reports that the Cabinet Committee on Security had warned against buying Airbus aircraft because it could provoke a diplomatic row between India and the US—the country home to Boeing. “There has been no such meeting. A plane purchase decision is usually taken on commercial grounds.”

Indian Airlines currently has a fleet of 56, of which six are leased planes. While its batch of A320s is relatively new with an average age of 12 years, the other 20 — 11 B737-200s and 9 A300s — are 18-21-years-old. In contrast, Sahara and Jet, the state-owned carrier’s rivals, have recently inducted new planes that brought down their average fleet age to seven to eight years.

IA officials have long been arguing that replacements are sorely needed, in the absence of which the company would be left with just 30 planes ‘and 20 junks’.

The main reason for IA to renew its fleet is to bring down the operational cost. A large chunk of the airline’s expense goes towards keeping old planes air-borne.

The older a plane gets, the more money an airline has to spend on engineering overhauls and other modifications. Maintenance costs have been on the rise for Indian Airlines. While it was about 14 per cent of operating costs in 1997-98, it shot above 30 per cent in 2001.

IA has long been planning a major expansion of its international operations. That would include new flights to Hong Kong and Riyadh as well as additional services to south-east and west Asia. With a larger fleet, tapping these lucrative routes could yield fat dividends.

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