Air India fleet expansion plans run into privatisation headwinds

Air India's plans to expand its fleet have hit an air pocket, amid uncertainty after the government's top policy-making body, NITI Aayog, proposed the total privatisation of the national carrier to the PMO.

Decisions approved earlier by the airline's board regarding aircraft acquisitions are currently "on hold" and tenders for procurement of new planes have been deferred till clarity emerges, an airline source said.

In March, the Air India Board of Directors had approved a proposal to induct seven Boeing 787-9 aircraft in its fleet to improve connectivity to Canada, the US and Australia.

The airline was planning to float tenders for procuring these aircraft on lease this month. The decision has now been deferred.

"The decision (of floating  tenders) is on hold until there is clarity on the airline's future," said a top Air India official when asked about the plan to acquire these planes.

Similarly, the plan to procure ten ATR aircraft by Alliance Air, which has been awarded several routes under the regional connectivity scheme UDAN, have been put on the backburner, the official said.

Alliance Air, the regional arm of the national carrier, currently has ten ATRs in its fleet and had recently placed orders for leasing of 10 more such smaller-sized aircraft by the end of this fiscal.

As part of its fleet expansion plans, Alliance Air has plans to take its ATR fleet strength to 30 by FY 2018.

On the other hand, Air India is also leasing 22 Airbus A320 Neos, of which 4 have already joined the fleet.

According to the source, the airline had planned to issue bids for seven more such planes but now there is uncertainty over these tenders as well.

However, there is no change in plan, as of now, to take the deliveries of the remaining four of the total 27 Dreamliners (Boeing 787-800s) that the airline had ordered in 2006, which are to be inducted in the fleet between July and October this year, the source said.

The state-owned carrier has a total of 103 planes of which 42 are wide-bodied Boeing 777s, 747s, and 787s. 61 are narrow bodied Airbus 319s, 320s and 321s.

Its low-cost subsidiary, Air India Express, has 23 Boeing 737s.

Finance Minister Arun Jaitley too has proposed privatisation of Air India and the civil aviation ministry is looking at all options to make the airline strong and viable.

A cabinet note in this regard is likely to be prepared shortly, according to Minister of State for Civil Aviation Jayant Sinha.

Air India has piled up over Rs 50,000 crore of debt mainly because of high maintenance costs and lease rent. It barely made any operational profit in last decade, except in FY16.