State-owned airline Air India, which signed its first lease agreement to replace its old fleet last year, has received its first two leased aircraft — A320, said civil aviation ministry officials. According to them, with this the process of replacing the old fleet has begun.
During mid-2014, Air India signed a lease with Chinese lessor China Aviation Leasing Group Holdings for five A320 aircraft. “Air India has already got two of these new planes, and the remaining three are on its way. It is most likely that the other three aircraft will be received by mid-2016,” the official said.
Officials said that the lease is for 12 years. The board that governs Air India has approved dry leasing of 19 aircraft which have an average age of 18.5 years. The tender process for the leasing started in October 2013.
The 19 aircraft make about one-third of Air India’s fleet of narrow body aircraft—some of them as old as 20 years. Experts said that the old fleet is one of the main reasons for Air India’s low performance.
While the process of replacing the remaining three aircraft continues, Air India is in talks with Kuwaiti lessors to lease the remaining 14 aircraft. While, most airline companies go for three years leases, Air India’s 12 years lease is expected to help the company. The rest of the planes are at least two years away. Experts said that Air India has a large operations of ground staff and cabin crew, and also can maintain and service its own fleet, unlike other airlines.
Unlike a wet lease, where the aircraft comes with its own ground staff and cabin crew, in dry lease it is only the plane that is leased. It reduces the cost of operations.Air India is already suffering from huge losses—it has accumulated loses of Rs30,000 crore. “Reducing any amount of cost is only beneficial for the company,” said officials.
The new aircraft will also allow Air India to improve its on-time performance, something that the company is struggling with. Air India’s on time performance (OTP) for the month of July was 73.4%.Competitors have OTP of as high as 93%.
India’s largest airline by market share IndiGo measured OTP of 86.6%, while new companies like Vistara reported 93.5% and AirAsia had 86.6%.FE had earlier reported that at any point in time Air India has about 10 aircraft grounded. Once the planes cross 60,000 flying hours the maintenance schedule becomes tighter. The newer planes will help sort that problem as well. The new planes will also reduce the cost of operations—old planes need a higher level of maintenance compared to new ones. Another big advantage is that the newer planes are more fuel efficient. Aviation turbine fuel make for 50% of airlines’ cost.