Air India set to rework aircraft orders; bailout package likely

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New Delhi: Air India would revisit its fleet acquisition plan in an effort to cut its mounting losses. The state-owned carrier would either cancel or reschedule the $15-billion orders placed for 111 aircraft, civil aviation minister Praful Patel told Parliament on Tuesday.

However, Patel did not say what will be the size of the new order. This is for the first time the civil aviation ministry or Air India has said on record it is contemplating cancellation of a part of the order for new aircraft being sourced from Boeing and Airbus. The airline has already taken delivery of 50 aircraft.

The minister had so far maintained there was no need to cut the order, even though other domestic airlines cancelled one-third of their aircraft orders for 2009. Air India, incidentally, is expected to report a loss of Rs 7,200 crore for FY09.

The minister’s statement on Tuesday clearly stated the mess Air India has got into and the government’s intention to approach Parliament for a bailout. “The equity base of Air India is only Rs 145 crore. The govenement, in the past, has never assisted Air India, unlike governments in other countries assisted their airlines when in similar difficulty.”

The government, Patel said, is working on providing fresh equity support and soft loan to Air India. The airline, which was forced to defer payment of salary for 15 days in June to most staff, has piled up a loss of Rs 5,000 crore in 2007-08. Before their merger, Air India and Indian Airlines had incurred losses of Rs 541.30 crore and Rs 230.97 crore, respectively, in 2006-07.

In his reply to the calling attention motion, Patel said, “Unfortunately, all advantages of the merger (of Air India and Indian Airlines) has not accrued.”

Discussing the restructuring measures being planned at Air India, Patel said independent directors would take up half the board seats at the airline. He said the national carrier will have an international advisory board comprising eminent persons and a professional chief operating officer.

The airline’s no-frills subsidiary, Air India Express, would expand its services into the domestic routes to compete in the low-cost carrier market, he said.

The airline will also rationalise its routes, manpower and incentives to employees. However, he said these decisions have to be taken by Air India. He also added that the airline was planning to return its leased planes at the earliest.