Air India to replace six Airbus A-319s with A320neos, raise $350-m bridge loan

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New Delhi | Updated: December 18, 2014 8:47 AM

National carrier Air India will phase out by next year six of its old..

Air India will phase out by next year six of its old, problematic Airbus A319s.Air India will phase out by next year six of its old, problematic Airbus A319s.

National carrier Air India will phase out by next year six of its old, problematic Airbus A319s that have been in operations for about 30 years, replacing them with new Airbus A320neos (new engine option). India’s number one carrier, IndiGo, ordered 250 A320neos in October this year.

The decision was taken at a board meeting on December 11. The board also decided, in-principle, to prepare a road map for 14 more A320neo, for which it would negotiate seperately with Airbus, said a top Air India official.

The airline decided that three of these planes will be taken under a leaseback arrangement —  the seller leases it back from the purchaser for the long term and continues to use it without actually owning it.

The decision comes after the airline’s failure to attract bidders last year, even as it issued a fresh global tender for the lease of 19 new A320s.

The airline has been facing financial turmoil, with losses mounting to over  Rs 30,000 crore. An Airbus A320neo has 230 seats in economy configuration while an A319 has around 144.

A top Air India official said that besides the A320neo, the board has also decided to use three of its Boeing 777-200 LR planes on domestic routes till June next year — it has not been able to sell them so far.

The airline sold five of these Boeing 777-200 LR planes to Jet Airways late last year at throwaway prices, which raised eyebrows in the government — these planes were hardly 5-6 years old. But Air India called these planes “fuel guzzlers”.

The AI board also decided to raise a bridge loan of $350 million (Rs 2,205 crore) to finance the acquisition of three more Dreamliners, but with a tweak to the current order — instead of B787-800, it will be B787-900.

The bridge loans will be refinanced through a sale and lease back arrangement.

“We are in talks with Boeing and will ask them for making necessary changes in the order. This change will not only increase 40 more seats, it will also help in increasing nonstop flight range from 12 hours to 14 hours. By doing this we can add non-stop flight to Delhi to JFK airport (New York). We plan to get these three planes with 900 series by June next year,” S Venkat, Air India’s executive director of finance, told FE.

“We also have decided to get the rest six Boeing 787 Dreamliners with the new 900 series instead of the 800 series,” said Venkat. The airline recently received its 18th Dreamliner – all 787-800s.

Venkat said the airline, as per its turnaround plan, needs 70 narrow-bodied planes by next year. Currently, it has 59 such planes. “We have to do so to combat heightened competition on domestic routes,” Venkat explained.

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