Air India Express plans to expand network to Iran & Russia

Written by Roudra Bhattacharya | New Delhi | Updated: May 1 2014, 06:30am hrs
AIAir India Express has 17 B737s in its fleet, which came down after it recently returned four leased aircraft. PTI
Air India Express (Air India Charters), the low-cost arm of Air India, plans to expand network into north India, and overseas markets like Iran and CIS (Commonwealth of Independent States) countries such as Russia and other former Soviet block nations under its turnaround plan, industry sources told FE.

K Shyam Sundar, who took over as CEO last month, said the plan is to lease 19 new Boeing 737-800 aircraft over the next three years to reach target fleet size of 36 aircraft by FY17. Air India Express has already released a tender for dry lease of eight B737s, for which it has received bids for six. At present, the airline has 17 B737s in its fleet, which came down from 21 after it recently returned four leased aircraft.

We are evaluating the response for the six aircraft lease tender and will soon issue a re-tender for two more at least. The first four new aircraft will help us in getting back to our original fleet size of 21, while the rest will be for expansion. We have yet to go to the board with the network expansion plans, so I cannot comment on that, he said.

Asked why the airline opted for the lease model instead of buying new aircraft, Sundar said, The lease option gives us a lot of flexibility in terms of capacity. We can shed weight when we need to, and add in other times. Leasing will also help the airline expand its fleet faster than buying anew because any new orders to Boeing would take longer to deliver.

Analysts said buying new aircraft is complicated for Air India because, unlike private carriers, it needs a host of government permissions going up to the Cabinet for any major expenses. Moreover, with debt of R44,000 crore on its balance sheet, half of which is aircraft-related and the rest (nearly R18,000 crore) in long-term working capital loans, it will be tough to convince the government for major purchases.

Air India is expected to post a lower net loss of R3,900 crore for FY14 compared with previous years, despite a projected 18% jump in revenues to R19,500 crore, as reported by FE in its edition dated January 8, 2014. The airline, which recorded losses of R5,200 crore in FY13 and R7,560 crore the year before, has been turning around operations through sale of assets like real estate and some aircraft, route rationalisation and lowering wage bills across the board. The turnaround plan was adopted after the government in April 2012 cleared a R30,000-crore package to bail out Air India and its subsidiaries.