January 16, 2017 TnH Global

Air India to double fleet by leasing 100 planes

The government has decided that Air India will almost double its fleet by adding over 100 aircraft, but without burdening the exchequer with a mammoth debt burden like last time. The airline will grow by leasing aircraft instead of purchasing them — the model adopted by Congress-led UPA.

“AI will induct 100 more aircraft in next four years. We have decided not to seek any additional budgetary support except for the turnaround plan approved for the airline earlier. The airline will lease aircraft and has the resources to make the payment that needs to be made for leasing,” aviation secretary R N Choubey said.

A financial support of Rs 30,231 crore was approved for AI in 2012. Of which, it has received Rs 22,280 crore till March 2016 and another Rs 1,713 crore was to be given in FY16-17. The Modi government has decided that the airline’s growth plan will not lead to any enhancement in this equity support. AI has 118 planes, of which 41 are wide-body used on long-haul and a few domestic routes, 66 narrow-body are used on domestic and nearby international routes, and 11 are regional jets. 77 planes are owned by the airline, 22 were sold and leased back and 19 are leased.

By March 31, 2020, AI group is looking at a fleet of 232 as some planes from the 111-aircraft order placed in 2006 are yet to be delivered. AI will take on lease 40 more Airbus A-320s for the erstwhile Indian Airlines that serves domestic and nearby international routes. It will order about 35 turboprops. And AI Express, which currently has 17 Boeing 737s, will get 18 more B-737. “The airline is on track as far as its financial and operational improvement is concerned. It had an operating profit last fiscal and will be in net profit by 2019-20,” said Choubey. However, the recent spurt in oil prices could be a cause of worry, he added.

“AI management is talking to banks for debt restructuring,” Choubey said. The airline’s total loan is about Rs 50,000 crore, of which Rs 28,000 crore is working capital loan at an interest rate of 10%. It is seeking to convert this working capital loan to 7% LIC loan. Switching Rs 10,000 crore will lead to a saving of Rs 300 crore annually in debt servicing. The annual debt servicing cost is Rs 4,000 crore.

News Source: timesofindia.indiatimes.com