The Hindu : Govt. extends IA bid for new aircraft

Online edition of India's National Newspaper
Friday, Mar 28, 2003

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Govt. extends IA bid for new aircraft

By Vinay Kumar

NEW DELHI MARCH 27. The Government has extended the Indian Airlines' proposal for acquiring new aircraft for a further period of six months. Though the domestic carrier is learnt to have sought an extension of bids by another three months, the Government last week dashed off a letter granting extension, highly-placed sources told The Hindu today.

The offers from aircraft and engine manufacturers — expiring on December 31, 2002 — were extended till March 31, 2003. Yet another extension indicates the indecision plaguing the Government machinery in giving a go-ahead for acquisition of 43 new aircraft at an estimated cost of nearly Rs. 10,100 crores.

The next step would be to cross the pre-Public Investment Board (PIB) hurdle, which could come next month. The proposal would then need the approvals from the PIB, the Cabinet Committee on Economic Affairs (CCEA) and the Union Cabinet before the deal could be swung at the aircraft manufacturer.

If the decisions at these levels are through before the year-end, IA could hope for going ahead with the induction of new aircraft by mid-2004. The domestic carrier will raise a fund for fleet acquisition through commercial borrowings in international and Indian market. At a time when civil aviation sector is witnessing a grim scenario globally, the possibility of new aircraft acquisition for expansion of fleet by Indian Airlines comes across as a positive development.

The IA board had narrowed down on the family of Airbus 319, 320 and 321 for its fleet as it would mean going for the same type of aircraft which the carrier operates. It would also cut down the period of training for engineers and pilots.

Meanwhile, the board met today and noted that the airline, incurring loss for the past two years, was able to reduce its operating loss from Rs. 220.65 crores to Rs. 153 crores in the current fiscal.

While approving the budget for the 2003-04 fiscal, the board noted that the operating loss is estimated to go down further by Rs. 128 crores to Rs. 25.50 crores. The airline hopes that the fuel prices would remain steady and projected passenger growth of five per cent.

The board decided to set up a subsidiary with an authorised capital of Rs. 100 crores and paid up capital of Rs. 10 crores to provide ground-handling services to its own air services and services of other domestic and foreign airlines.

This subsidiary will enter into joint venture with private parties for investment needed to upgrade infrastructure for provision of world-class handling of air services, which is likely to boost its present annual earnings of Rs. 120 crores from such services.

A Voluntary Retirement Scheme (VRS) for non-operating employees was also approved. It would not cover pilots, engineers and technical employees. The airline hopes that about 1,000 employees would avail of the VRS, which would be more liberal.

Though IA would end up paying Rs. 47 crores to the VRS seekers, it would save about Rs. 19 crores annually.

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