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IA defers decision on 50-seater aircraft

Kishori Gopalkrishnan in Bombay

Indian Airlines may yet again defer deciding conclusively on inducting 50-seater aircraft into its fleet due to the severe ongoing resource crunch.

The airline board's subcommittee, appointed to recommend the aircraft purchase, has now decided to induct Infrastructural Leasing and Financial Securities Ravi Parthasarthy on to the panel besides making a fresh reevaluation and hold commercial negotiations with one of the three contenders -- Saab of Sweden, Bombardier of Canada, and the Franco-Italian ATR.

The process of selection is now again likely to be delayed as not even the selection of the supplier is expected to be finalised within two to three months. It was in August this year that the IA board had decided that the in-house committee would evaluate and submit its recommendation within a month. On this basis, the IA board was to make a final selection quickly and forward it for approval of the government.

Airline sources said that IA is now deliberately going slow on the 50-seater aircraft deal due to the shaky position of the government as well as the resources constraint. The finance ministry has decided to slash its planned loan from Rs 9 billion to Rs 3.5 billion. Indian Airlines had sought the financial assistance for its fleet acquisition and its restructuring plans.

Indian Airlines had sought the loan on the basis of the Kelkar Committee's recommendations that the airline be compensated for the grounding of the Airbus A300 aircraft for 18 months a few years ago.

The proposal for the 50-seater aircraft was initially floated in 1993 but the plan was held repeatedly with different evaluation committees making varying recommendations.

The initial proposal for purchase of six 50-seater aircraft had first got stuck as the IA board had asked for a sum of Rs 500 million to purchase spare parts for the new fleet, which demand the civil aviation ministry turned down.

The proposal was revived due to fresh funds flowing in from the sale of old Boeing aircraft, which would have been sufficient for financing the deal. However, Hindustan Aeronautics Limited then claimed that only it could purchase the aircraft, resulting in a hold-up once again.

When the proposal finally moved forward again, an evaluation committee recommended only wet-leasing of the aircraft (hiring of an aircraft with a crew). In September 1996, the IA board picked up the threads of the deal and yet again was in the process of selecting a seller of the aircraft when a leading contender, Fokker, closed down its operations worldwide.

This threw the whole exercise offtrack again and it was only a couple of weeks ago that the board made a concerted push to finalise a supplier from amongst Saab, ATR and Bombardier. But IA officials said that it would was unlikely that a decision would be reached soon now that a new member has joined the committee. Moreover, the turmoil in New Delhi will also affect the purchase plans.