Air India may give wings to Reliance Fresh

Written by Shaheen Mansuri | Mumbai, Nov 20 | Updated: Nov 22 2008, 05:10am hrs
Reliance Fresh, the retail venture of Reliance Industries Ltd (RIL) is seeking to acquire one of ageing cargo aircraft of National Aviation Company of India Ltd (Nacil)formed by the merger of Air India and Indian Airlinesto service its network of retail outlets.

While both companies have denied any such plan, a source close to the developments said RIL is open to either buying or leasing one aircraft from Nacils fleet. Reliance Fresh is likely to invest more than Rs 25,000 crore over the next four years in its retail business.

The reserve price for each of the older Boeing aircraft in Air Indias stable is approximately $60 million, while that of old Airbus aircraft is pegged at $20 million each. Of the 147 aircraft in the Nacil fleet, eight are freighters (all from Air India), including four Boeing 737-200s and four Airbus A310-300s. Reliance Fresh wants to source its aircraft from among these.

Last year, RIL had said it had plans to obtain cargo planes to ferry fresh fruits & vegetables, exotic flowers and other perishables from rural business hubs spread across several states to its retail outlets spread across the country. But a slowdown in the general economic conditions scuppered those plans. If the deal with Nacil goes through, this will be the first cargo plane in its fleet.

Jitendra Bhargava, executive director (PR), of Air India said, Though we have earlier sold one of our freighter aircraft to India Posts, RIL has not approached us as of now. But in future if they approach us for the purchase of our aircraft, we will consider the proposal. An RIL spokesperson also denied that the company had talked to Air India for the purchase of any cargo airliners.

Freighter aircraft can carry between 15 and 20 tonne of cargo. Air India proposes to aggressively lease or sell some of its freighter planes to increase revenue from cargo operations by 10% to around Rs 900 crore by the end 2008-09. Nacil logged a loss of Rs 2,100 crore for 2007-08.

According to an analyst working with a Mumbai-based broking firm, It makes a smart business proposition for Air India to either lease or sell its older aircraft. Like other airlines, Air India is also hit by the global financial meltdown, coupled with mounting losses. The sale of these older assets can provide some relief to the national carrier.

According to a source in one of the group companies, subject to government approval RIL has plans to build small airstrips close to its warehouses for cargo aircraft to land. RIL has indicated that it would go in for a mixed bag of new and old cargo aircraft for its fleet to reach out to more markets.