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Air-India’s Dreams Line Up

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Sinking national carrier Air India is reportedly considering cancelling or postponing a deal to acquire 27 Boeing Dreamliner aircraft. The aircraft were ordered in 2005, as part of a Rs 30,000 crore ($6.6 billion), 68 aircraft acquisition programme, say media reports. The delivery of the Dreamliner is also running two years late.


Recently annointed civil aviation minister Vyalar Ravi  (he was earlier Minister for Overseas Indian Affairs, a position he still holds) is quoted saying the Government would reconsider the purchase of these aircraft in `accordance with the carrier’s current financial health. The airline has no money and is under huge debt.’ The same report says an additional Rs 14,000 crore ($3.1 billion) of debt might be required to finance this purchase.


Actually, it’s frightening to think of what the combined hit will be. Air-India has over Rs 44,000 crore ($9.7 billion) of loans outstanding and accumulated losses of Rs 22,000 crore ($4.8 billion). Air-India has reportedly has asked for a handout of Rs 6,500 crore ($1.3bn) to stay afloat. So a Dreamliner project can financially cripple the airline, were such a thing possible.


On the other hand, Boeing says the Dreamliner will use 20% less fuel than similar sized airplanes of today and will travel at the same speeds, in addition to higher humidity inside and increased comfort and convenience. Composite materials make up 50% of the primary structure of the airplane including the fuselage and the wing.


So fact is Air-India could do with such aircraft if the enterprise is to run and not shut down. Else, it would become doubly uncompetitive over coming years. A total shut down might be improbable but a change of management combined with disinvestment (even at lower values) could be pursued. Even once doddering organisations like Coal India Limited  have turned into one of India’s most valued companies on the bourses. Air-India needs similar CEOs too, from other arms of Government like the public sector and not bureaucrats with no corporate or business experience.

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