Air India : AI : AIC

Air India might delay Boeing 787 deliveries

Air India may seek to abandon its position as the second airline due to receive Boeing [Vous devez être inscrit et connecté pour voir ce lien] because it is short of cash, Bloomberg reported Thursday, quoting “two people familiar with the airline’s plan.”
The airline may seek to push back delivery but will not cancel its order for 27 787s, Bloomberg reported. It noted that many other 787 customers might jump at the chance to move up and take over Air India’s delivery slots, given that the 787 is more than three years late.
Boeing executives have said the company will deliver the first 787 to launch customer All Nippon Airways in August or September and deliver 12 to 20 787s this year.

787 Dreamliner will turnaround ailing Air India: Boeing

In a CNBC-TV-18 special, Dinesh Keskar, President of Boeing India talks about where he sees the Indian aviation sector in the coming years. He also elaborates on the deliveries pending with Air India and how things are shaping up with the state-owned carrier.br /br /[size=12][face=Calibri][size=12][b"]Below is a verbatim transcript. For complete details watch the accompanying videos.


[b]Q: You have said that you are going to be raising your forecast for India over the next 20 years by 15%. I understand this is the second time that you have actually raised your forecast. Do you think India will need 1,320 planes worth USD 150 billion over the next 20 years? What are you basing your optimism on?

A: Several factors - If you look at the real data of the GDP growth in India - it continues to be 8% or over which many countries in the world can’t say that. Secondly and more importantly, if we look at how many passengers are flying domestic, it has exceeded 17% for the first five-months of this year and exceeded about 16% for all of last year. The third factor is fuel price, which is a major factor in Indian aviation because our fuel price is higher than many parts of the world and that fuel price is now in check.

It had gone over USD 100 per barrel and it’s close to USD 96 per barrel but we feel that the fuel price is going to be somewhat stable around that. Finally, the discretionary income of Indians is going high and with that the low cost carriers have done very well.br /br /Q: There seems to be a perception that Boeing seems to be losing out in the race as far as Asia is concerned and not just India. If you look at the three large orders in the recent past whether it is AirAsia which just ordered another extra 100 Airbus aircrafts worth USD 18 billion, GoAir which has decided to buy 72 Airbus aircraft, IndiGo 180 which was the biggest order before being topped by AirAsia. The perception is that Boeing is losing out in this region. Isn't it the right perception?

A: What's important from our perspective is how many airplanes we are adding year after year into the country. Are we doing balanced deliveries and are we in balance. I am not looking at necessarily selling 200 airplanes over the next 20 years.

What I am looking at is - do I have my customers like [Vous devez être inscrit et connecté pour voir ce lien] , like [Vous devez être inscrit et connecté pour voir ce lien] who needs airplanes. For example, both of them have a backlog respectively Jet Airways - 39 airplanes and SpiceJet - 30 airplanes. With that and some leased airplanes - they are adding effectively 20-22 airplanes in India, which is in line with what my competition is doing.

[b]Q: What is the kind of market share that you expect to have in India and also why is it that these large orders are going the Airbus way and not the Boeing way?

A: Let me tell you that we didn’t even compete for these orders. I didn’t make an offer. You can check with the airlines concerned. Right now if you look at our backlog - it’s over 2,300 airplanes just in the 737 market. If you look at our customer base in India which is Air India Express, SpiceJet and Jet Airways - they themselves can get airplanes from us to meet their growth profile.

In fact, Jet Airways is right now looking for more airplanes and we have to go and find leased airplanes for them from the market so they can continue their growth pattern. So yes, you may have that perception but if you understand the industry and understand how the airlines operate, you probably won’t have that perception. These things make a big splash when you say 100-150 airplanes and all those things.br /br /[b]Q: If you can give us a sense at least now in the short term i.e. in the next 12 to 24 months perhaps - what the order book really looks like as far as Boeing is concerned specifically for India?

A: We have 109 airplanes remaining to deliver in India which are firm orders. From which 39 of them are for Jet Airways, 30 of them are for SpiceJet. These are what I consider 737 single aisle orders. Both these airlines on their own, with working with us in some cases have placed additional orders for leased airplanes, which are coming directly from the factory but owned by leasing companies.

The 27 Dreamliners for Air India, 10 Dreamliners for Jet Airways and 5 - 777’s are still remaining to be delivered in the Indian market. They all should be done in about next five years.br /br /[size=12][b][face=Calibri][size=12][b"]Q: Let me talk to you about the Air India order as far as Dreamliner is concerned this are inordinate delays. The first Dreamliner that was supposed to have been delivered to Air India in September, 2008, we understand that 18 should have been delivered by March, 2011 – when do you expect to make the deliveries finally to Air India?

A: We will make the first delivery of the 787 Dreamliner to Air India in the fourth quarter of this year and we feel good about it. On Sunday the 787 which is in All Nippon Airways (ANA) colours landed in Tokyo and started the service readiness operational validation. It is flying from city to city and they are doing mock trials as though this airplane is in service so, ANA’s employees can understand how to work with this airplane.

Similarly, we see now that the 95% plus flight test is all complete and only the functional reliability testing remains on 787 right now. With all that happening, we are going to deliver to ANA the first airplane this quarter and to Air India in the next quarter. Of course now that we see the light at the end of the tunnel we are really excited.br /br /[size=12]Next week I am going to bring the 787 into Delhi. We are going to have some demonstration flights to top aviation personnel in India. Then we are going to take that airplane, ferry it to Mumbai and then do another flight there for Air India and Jet Airways people. After that is complete, on Saturday the following week this airplane will fly nonstop from Mumbai to Seattle for 15 hours and 20 minutes.br /br /[size=12]This will show the operational readiness to everybody and hopefully will take out all doubts. When this airplane comes into service, the majestic view when it will land and hopefully you can cover that, it will be a brilliant sight for anybody to watch.br /br /[b][face=Calibri][size=12]Next]Q: As far as the Air India story is concerned we understand that things are not good as far as the airline is concerned, there have been several committees that have been set up to figure out a turnaround plan. They could use the compensation money that they asked you for the USD 850 million which was the compensation notice that they had issued to Boeing. Where do things currently stand with that?

A: First, I wouldn’t comment in the media about this. Let me make you a different point which is very valid and that is - of all the airplanes that are out there in the world today which airplane can give you maximum margin and maximum cash flow and I respectfully submit that it is going to be the 787, why? Because it’s a brand new airplane everybody would want to fly on it.

So the load factor on that airplane will be very high when Air India introduces it. It has 20% lower fuel burn compared to similar airplanes. It will have 30% lower maintenance cost and then on the revenue side it has high cargo potential, high revenue, all that coupled, you are going to have significant high cash flow that you cannot get from any other airplane in the world today.

As you probably know, 835 of these airplanes are already sold to 56 customers worldwide. If you came today with the money, I will probably tell you that delivery will be in 2019 and Air India is lucky that some airplanes are already built and are sitting in the tarmac in Washington near Seattle and I think what is going to help Air India in my mind get a turnaround is really that airplane.

Today, Air India has very large airplanes which is what they need, the 350-seater 777-300 ERs and then it has A320’s and the 737’s. What it does not have is the middle of the market airplane, which is like a 250-seater airplane which in the past they had a airplane called A 310. Therefore, they can use this airplane because of its beautiful range it can go from Delhi to Melbourne.

It can go non-stop 12-13 hours and it can do London, Tokyo, Singapore or Middle East. They will have a new tool in their arsenal to take on competition. So we are really excited about Air India having this airplane and for the Indian people to get a chance to fly first on the Dreamliner.

• GE90-115B d'un B777-300ER d'Air India endommagé par "bird-strike", paraît-il.
  

Air India aims to receive seven 787s by end March 2012

Air India will take delivery of its first [Vous devez être inscrit et connecté pour voir ce lien] in October, a company source has indicated, with a further three to follow before the end of the year.
The carrier will receive a total of seven by the end of March 2012, the source said. India's flag carrier has 27 of the type on order.
The airline will use the twinjets on its long-haul services, but the source was unable to say which aircraft they will replace as this is still in the "planning stage".
Air India's first 787, which is likely to be Airplane 25 from the [Vous devez être inscrit et connecté pour voir ce lien] assembly line, will be registered as VT-ANA, and is powered by General Electric [Vous devez être inscrit et connecté pour voir ce lien]-1B engines

Air India's first [Vous devez être inscrit et connecté pour voir ce lien] made its maiden flight 31 July, though the sortie was cut short by a declared emergency traced to a failed sensor.

Operating as [Vous devez être inscrit et connecté pour voir ce lien] 233, Airplane 29, wearing Air India's colours, departed Paine Field at Boeing's Everett, Washington facility at 12:46 local time on a standard B-1 production flight for an initial checkout of the aircraft's systems.

Dubbed ZA233, the aircraft took off with an estimated 5h of fuel aboard and four crew, according to recorded air traffic communications.

The flight marked only the third production 787 to fly to date, with the first, Airplane Nine, ZA102, flying in January, followed in March by Airplane 23, ZA177, for Japan Airlines.

Minutes after departure, the aircraft reported that it was "working a little bit of a flap problem and we might be returning" to Everett before formally declaring an emergency at 12:55 local time, requesting a return to Paine Field, citing an issue with its flight controls.

Boeing says the aircraft "performed a safe landing" at 13:12 local time and the issue was traced to a failed sensor.

The airframer declined to offer any additional information on the type of the sensor or nature of the flight control issue.

ZA233 is expected to be eventually registered as VT-AND, but has been assigned a temporary US registration of N1006N.

The aircraft, which is powered by two General Electric [Vous devez être inscrit et connecté pour voir ce lien]-1B engines, will be ferried to San Antonio, Texas where Boeing has established a refurbishment and change incorporation facility for both 787s and 747-8s. Air India'a first will join ZA177, which has been in Texas since March.

The airframer expects initial type certification of the 787 with Rolls-Royce 'Package A' [Vous devez être inscrit et connecté pour voir ce lien] engines in late August, with General Electric certification to come later in the fourth quarter.

First delivery to Air India is slated for sometime late in the fourth quarter.

The Star Alliance network and Air India have decided to suspend the carrier's integration with the global airline alliance as India has not met the minimum membership conditions.

Star Alliance and Air India agreed on the minimum joining conditions in December 2007, Star Alliance said.

The review of Air India's application to join Star Alliance was conducted between the Indian Ministry for Civil Aviation, Star Alliance's CEO Jaan Albrecht and Air India's chairman and managing director, Arvind Jadhav.

During the review, all three parties agreed that Air India's integration into the alliance will be suspended.

"With the collective decision to put the integration efforts on hold today, we aim to contribute to Air India's flexibility to concentrate on its ongoing strategic reorientation. In this process, our member carriers will continue to provide assistance to Air India wherever required," Albrecht said.

"Existing bilateral relationships with Star Alliance member airlines will not be affected by this decision, which also leaves room to discuss a potential Alliance membership at a future stage, if deemed appropriate by both parties," Star Alliance said.

Air India is likely to confirm later on 12 August that its chairman and managing director, Arvind Jadhav, will leave the company.

It is not clear if Jadhav, a career civil servant, has resigned or was terminated, sources at the state-owned company said.

However, the ministry of civil aviation has come under increasing political pressure to replace Jadhav in an attempt to arrest the continuing problems at the debt-ridden airline.

The ministry is reportedly dividing the chairman and managing director roles between two officials that it will second to the airline and begin the search for a full-time replacement shortly.

Earlier this month, the country's civil aviation minister, Vayalar Ravi, attributed rising fuel prices, falling yields and high interest rates on loans as the main reason for the carrier's estimated loss of Indian rupees (Rs) 69.94 billion ($154 million) in its 2010-2011 financial year.

Ravi also revealed that the government had injected Rs8 billon in 2009-2010, Rs12 billion in 2010-2011 and Rs7.1 billion to the airline so far this year.

The country's Cabinet Committee on Economic Affairs (CCEA) has also approved an additional equity infusion of Rs12 billion for this year.

Air India is also restructuring its debt, which is estimated to be around $4 billion. This will take about three months to complete, said Ravi..

Both political pressure and union opposition have made it difficult to spin off its cargo, engineering and ground handling divisions that account for a large portion of its employees.

The airline has also lost significant market share over the last few years to both full service and low-cost competitors.

Ho, ho ! Suivez mon regard ! Et grattez plus loin que le vernis, ... pour découvrir les magouilles ! Il y en a "juste à côté", nous dit-on !

Air India has appointed Rohit Nandan as its new chairman and managing director, replacing Arvind Jadhav with immediate effect.

Nandan, a career civil servant, was most recently joint secretary in India's civil aviation ministry. A spokesman from the state-owned airline said the Indian government is deciding on Jadhav's future assignment. Jadhav was appointed to the job in 2009.

The appointment of Nandan comes as the civil aviation ministry is under increasing pressure to improve the airline's financial performance. Air India estimates a loss of Indian rupees (Rs) 69.94 billion ($154 million) in its 2010-2011 financial year, and has received a number of equity infusions from the government.

Air India is restructuring its debt, which is estimated to be around $4 billion. This will take about three months to complete, civil aviation minister Vayalar Ravi has said.

Earlier this month, Star Alliance suspended the carrier's plans to join the group, saying that Air India had not met the minimum membership conditions.

Air India Gets Relief From Oil Companies

In a major act of relief for struggling Air India, state-run oil marketing companies agreed to extend the airline’s credit limit by two to three months for the purchase of jet fuel, instead of requiring daily payments.

“Instead of cash-and-carry, Air India will from now on make payments on the basis of this credit limit of two to three months. So, the tension of making daily payments is now over,” says Aviation Minister Vayalar Ravi. Air India has been paying 165 million rupees ($3.6 million) a day for fuel.

The decision to provide the credit was made Aug. 18 by a group of ministers headed by Finance Minister Pranab Mukherjee and attended by Petroleum Minister S. Jaipal Reddy, Home Minister P. Chidambaram, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and Civil Aviation Secretary S. Nasim Zaidi. It was also the first meeting to be attended by the newly appointed chairman of Air India, Rohit Nandan.

“The group of ministers reviewed the financial and operational performance of the ailing carrier,” Ravi says.

The group also asked a panel of officers to assess the carrier’s financial restructuring plan.

“A subcommittee of the Finance Ministry will submit a report on the turnaround and financial restructuring plan next month. All attempts to strengthen Air India with some financial support to improve its cash flow will be made by the government,” Ravi says.

The panel will meet again in mid-September to discuss Air India’s business plan.

Since December, Indian Oil Corp. Ltd., Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd. had stopped providing aviation turbine fuel to the cash-strapped national carrier on credit, which is the industry practice, because the airline had defaulted on payments. Under normal procedures, airlines have a three-month credit period to pay their fuel bills. However, the state-run oil companies refused to follow this rule because of Air India’s inability to clear previous bills. Shifting to normal credit will, for the time being, reduce the carrier’s uncertainty over the daily fuel supply. The company’s unpaid fuel bill totals 23 billion rupees ($509.2 million).

Air India’ s failure to pay the taxes and soaring fuel prices forced the state-owned oil retailers to cut fuel supply to the airline in May, forcing it and its low-fare unit Air India Express to cancel 147 flights between May 27 and June 2.

As a result, the carrier incurred losses of 100 million rupees from flight cancellations.

The latest threat came on Aug. 10, when oil companies stopped all fuel supply due to outstanding debts but resumed it the same day following government orders.

Currently, the state carrier’s outstanding debts total 432 billion rupees ($9.5 billion), according to figures presented by the aviation minister in parliament.

After losing Star Alliance, AI makes effort to join SkyTeam
Having failed to make it to Star Alliance, Air India has begun efforts to become part of rival aviation services alliance, SkyTeam. Top aviation ministry officials explored the opportunity for Air India with SkyTeam managing director Michael Wisbrun last week. SkyTeam is an alliance of 14 global air carriers.

Top civil aviation officials said that Sky Team managing director Michael Wisburn had one round of discussions last weekend with top brass of the nodal ministry led by secretary Nasim Zaidi.

The officials who declined to be quoted said any decision to change course would have to be taken by Air India’s board instead of the government. The meeting with SkyTeam comes close on the heels of a virtual collapse of Air India’s attempts to enter the largest aviation alliance, Star Alliance late last month.

“It is for the new chief executive, Rohit Nandan, to take a decision on terminating or reopening negotiations with Star Alliance. But the options are open,” the officials said. SkyTeam is the second largest aviation alliance in the world serving close to about 920 destinations. Prominent SkyTeam members include Dutch carrier, KLM, AeroFlot, Delta, Alitalia, Air Europa and Vietnam Airlines.

SkyTeam’s Wisbrun meeting with civil aviation ministry officials assumes significance, as Air India is to yet formally declare any form of scrapping of negotiations with Star Alliance. The officials said, “Since Air India is the national carrier, our efforts to get it into the alliance.” The officials added, that private sector carriers, that were beginning their international operations could join the alliance after AI induction.

But Star Alliance in an email had indicated that entry of Air India was not on the agenda when the chief executives board meets in December this year. The email reply from Star Alliance’s vice-president corporate office had said, “Not from the current perspective.” The email though added, “But leaves room to discuss a potential Alliance membership at a future stage, if deemed appropriate by both parties.”

Star Alliance had called off Air India’s induction into the grouping late last month on the grounds that the carrier had failed to comply with some of the conditions to join the alliance.

Jeannot a écrit:Après n'avoir pu rejoindre la Star Alliance, Air India va faire son maximum pour rejoindre join SkyTeam

After losing Star Alliance, AI makes effort to join SkyTeam
Having failed to make it to Star Alliance, Air India has begun efforts to become part of rival aviation services alliance, SkyTeam. Top aviation ministry officials explored the opportunity for Air India with SkyTeam managing director Michael Wisbrun last week. SkyTeam is an alliance of 14 global air carriers.

Top civil aviation officials said that Sky Team managing director Michael Wisburn had one round of discussions last weekend with top brass of the nodal ministry led by secretary Nasim Zaidi.

The officials who declined to be quoted said any decision to change course would have to be taken by Air India’s board instead of the government. The meeting with SkyTeam comes close on the heels of a virtual collapse of Air India’s attempts to enter the largest aviation alliance, Star Alliance late last month.

“It is for the new chief executive, Rohit Nandan, to take a decision on terminating or reopening negotiations with Star Alliance. But the options are open,” the officials said. SkyTeam is the second largest aviation alliance in the world serving close to about 920 destinations. Prominent SkyTeam members include Dutch carrier, KLM, AeroFlot, Delta, Alitalia, Air Europa and Vietnam Airlines.

SkyTeam’s Wisbrun meeting with civil aviation ministry officials assumes significance, as Air India is to yet formally declare any form of scrapping of negotiations with Star Alliance. The officials said, “Since Air India is the national carrier, our efforts to get it into the alliance.” The officials added, that private sector carriers, that were beginning their international operations could join the alliance after AI induction.

But Star Alliance in an email had indicated that entry of Air India was not on the agenda when the chief executives board meets in December this year. The email reply from Star Alliance’s vice-president corporate office had said, “Not from the current perspective.” The email though added, “But leaves room to discuss a potential Alliance membership at a future stage, if deemed appropriate by both parties.”

Star Alliance had called off Air India’s induction into the grouping late last month on the grounds that the carrier had failed to comply with some of the conditions to join the alliance.

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Bien, sûr, ...... on peut se demander si AF / AF-KLM va aller faire du Social au chevet d'AI !

No money to pay for 27 Boeing 787s ordered: Vayalar Ravi


New Delhi: The government's auditor has tabled a report that says Air India is in a financial mess largely because of its extravagant buying and leasing of planes and Civil Aviation Minister Vayalar Ravi admits the national carrier does not have the money to pay for 27 Boeing 787s that it has ordered.
Soon after the CAG severely criticised Air India's extravagant acquisition plans, Mr Ravi told NDTV in an interview that the delivery of the 27 aircraft had been delayed by Boeing for three years, there was no decision on whether the order would be confirmed or cancelled, but made clear that if these were delivered, there was no money to pay for them.
"I don't have the money to pay...I cannot beg the finance minister all the time for the money. It is difficult, this is the position now. The government cannot say we are confirming or we are rejecting, the workers also know that now...but it is not delivered so far, we have not paid so far. I don't have the money to pay for it also," the minister said.
The CAG report tabled in Parliament yesterday takes the civil aviation ministry to task for a faulty and hasty expansion plan that involved funding the purchase of new planes with debt or loans, calling it a "recipe for disaster." The CAG said this had led the airline to its current financially-crippled state.
Mr Ravi admitted that at this point it was "very difficult to pay salaries...the government has to pay money to Air India to pay salaries."
After the CAG report, the constant ministry-airline blame game has reached a shrill note. Former top Air India officials like Jitendra Bhargava have criticised the aviation ministry for interfering too much in the affairs of the airline. The ministry has been accused of bleeding the airline through large-scale freebies given out and faulty decision-making. The ministry has said critical decisions that went awry were made by the airline board.
The minister justifies the need to step in. "I interfere nowadays where, for what? There are 19 employees dismissed in one year. I intervene, I said no, take them back. That is interference to protect the workers' rights. Nothing wrong in it," Mr Ravi said.
But now, he says resolutely, the ministry will intervene to look at profitability. "I am going to look into subsidiaries, into Alliance Airline, into Air India Express...I want the cash flow. May I tell you the truth? It is very difficult to pay salaries. The government has to pay money to Air India to pay salaries. This is the situation, that is the interference. You must understand our problem."

Read more at: [Vous devez être inscrit et connecté pour voir ce lien]

Debt-ridden national carrier Air India does not have the funds to pay for the 27 Boeing 787s it has ordered, Civil Aviation Minister Vayalar Ravi said Sept. 9, a day after the country’s nodal public auditing agency flayed the state-run airline’s hasty expansion plans.
“The decision to acquire a large number of aircraft was risky and has contributed predominantly to the airline's massive debt liability,” the comptroller and auditor general (CAG) said in a report sent to parliament on Sept. 8. The fleet acquisition process also took an “unduly long time,” the CAG said (Aviation Daily, Sept. 9).

Il était facile de vendre à n'importe qui dans ces conditions ! Que vaut vraiment le carnet de commandes (B787) de Boeing ?

Ravi, in reacting to this report, says that the delivery of the 27 aircraft had been delayed by Boeing for three years. He did not specify whether the order would be confirmed or canceled, but made clear that if these aircraft were delivered, there is no mony to pay for them.

“I don’t have the money to pay ... I cannot beg the finance minister all the time for the money. It is difficult. This is the position now.

The government cannot say we are confirming or we are rejecting,” the minister said in an interview on a local news channel. The delivery of the first Boeing 787 to Air India is reported to have been further delayed by two months to December.

The CAG report tabled in parliament last week takes the Civil Aviation Ministry to task for a faulty and hasty expansion plan that involved funding the purchase of new planes with debt or loans, calling it a “recipe for disaster.” The CAG said this led the airline to its current financially crippled state. To a suggestion by the CAG that Air India be left alone by the government to have a chance for survival, Ravi says the ministry will intervene to look at profitability, admitting that it is currently difficult to meet payroll. “This is the situation, that is the interference. You must understand our problem,” he said.

India 'to review' Dreamliner purchase

Indian ministers will meet later this month to decide whether loss-making Air India should go ahead with an order for 27 Boeing Dreamliner 787 planes, a report Wednesday said.

The meeting, set for the second half of the month, comes as Boeing prepares to deliver the first Dreamliner plane to Air India after a delay of more than three years, Dow Jones Newswires reported.

"The group of ministers will discuss whether it makes commercial sense for Air India to buy the Dreamliners or not," the official, who did not wish to be named, was quoted as saying.

India's aviation ministry said it could not immediately comment on the story but Indian media reports have said the government is reluctant to proceed with the order due to Air India's financial difficulties.

The panel, which is reviewing Air India's turnaround plans, will decide whether to ask Air India to cancel or defer the delivery of the Dreamliners, the official told Dow Jones.

The list price for each Dreamliner aircraft as of 2010 was $185.2 million, but airlines usually get a discount on this price.

Air India, which used to dominate India's skies but now has a domestic market share of 17.4 percent amid fierce competition from private carriers, wants to use the planes to expand its long-haul operations.

Dow Jones quoted the official as saying the government wants to ensure that Air India has the financial capability to pay for the Dreamliner planes.

The 27 Dreamliners are part of a total 111 planes ordered by Air India from Boeing and Airbus.

Air India has been incurring massive losses due to falling passenger numbers and higher fuel costs. It was also hit by the large aircraft order.

Apart from the Dreamliners and three other Boeing planes, Air India has taken delivery of all the other aircraft in the 111-plane order. It is due to take delivery of the first seven Dreamliners between November and March.

Air India reported pre-tax loss of 70 billion rupees (1.52 billion) in the last fiscal year to March 2011 and has accumulated debts of more than $7 billion. The airline is currently losing around $5 million rupees a day.

India's Auditor General has said the "risky" acquisition of 111 new jets was mistimed and imposed "an undue long-term financial burden on the carrier".

AI to get $1.3 bn loan guarantees from American bank

Ahead of a GoM meeting to finalise Air India's financial restructuring plan, the US Exim Bank has decided to give loan guarantees of $1.3 billion to support the airline's fleet acquisition from aerospace company Boeing.

A decision to this effect was taken last week in Washington by the Board of Directors of the Export-Import Bank of the US.

The bank approved $1.3 billion in loan guarantees supporting Boeing commercial aircraft sales to Air India, a statement said after the Board meeting.



In addition to these final commitments, the Board also approved a $2.1 billion preliminary commitment to support future deliveries of Boeing aircraft to Air India, it said.

"Upon approval of the conversion of the preliminary commitment into a final commitment, the transactions in total will support the export of 30 Boeing aircraft to the state- owned, national flag carrier of India," it added.

Air India has pending orders for 27 Boeing 787 Dreamliners, the deliveries of which are expected to begin in the next two months. These are part of the 68-aircraft order placed by the national carrier with the US plane manufacturer.

This support would enable Air India to raise finances for acquiring latest technology aircraft at competitive interest rates compared to commercial financing, official sources said.

The Group of Ministers (GoM), at its next meeting later this month, is likely to take a final call on the acquisition of these planes whose deliveries have been delayed by almost three years due to various factors, including strikes by Boeing workers.

Air India To Cut Boeing 787 Order

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Indian state-run airline, Air India, will cut its order of Boeing 787 jets by more than half, the Economic Times reported on Wednesday citing an unnamed government official, as the cash-strapped carrier reels under billions of dollars of debt.

Air India's board has recommended buying 12 787 Dreamliners compared to an original order in 2005 for 27 aircraft at a cost of around USD$4.1 billion, the newspaper reported a senior civil aviation ministry official as saying.

A group of ministers led by finance minister Pranab Mukherjee will meet on Thursday to decide on a turn-around plan for the ailing carrier. India's civil aviation minister has previously said the airline cannot afford 27 Dreamliners.

Boeing's 787 made its first commercial flight on Wednesday as the firm looks to move on from glitches and setbacks in delivering the carbon-composite aircraft to carriers who have endured years of delays.

China Eastern Airlines on October 17 terminated an order for 24 787s rather than wait for production to pick up, while Air New Zealand voiced concerns over possible further delays and said it is seeking compensation from Boeing.

An Air India spokesman told reporters the company will communicate as and when any final decision is made on the orders, but that there was no fresh development as of now.

Air India has struggled under a bloated cost structure and stiff competition from nimbler rivals in a crowded aviation market. All of its international routes were loss making in 2009-10, a September government report said.

The national carrier, with total loans of USD$9.5 billion, is in talks with banks to restructure USD$4 billion of working capital debt and is implementing a turn-around plan to cut costs by redeploying staff and disposing of non-core real estate.

India's federal auditor criticised the airline last month for buying too many Boeing jets and imposing an "undue long term financial burden on the carrier," which is expected to post a pre-tax loss of INR70 billion rupees (USD$1.4 billion) for the year ended March.

US carriers unhappy with American aid to Air India

NEW YORK: Calling [Vous devez être inscrit et connecté pour voir ce lien] "one of the most poorly-run airlines in the world", American carriers have opposed the US Exim Bank's USD 3.4 billion support to it to buy Boeing 787 Dreamliners.

The [Vous devez être inscrit et connecté pour voir ce lien] (ATA), a trade group representing America's biggest carriers, has shot off a letter to US Export-Import Bank chairman Fred Hochberg opposing the decision, saying Air India's financial ill-health should disqualify it from getting American help.

The [Vous devez être inscrit et connecté pour voir ce lien] had last month decided to give loan guarantees of USD 1.3 billion to support Air India's fleet acquisition from Boeing and another USD 2.1 billion preliminary commitment to support future deliveries of the US aerospace company's planes to the Indian national carrier.

ATA Suing To Stop Ex-Im Bank Loan To Air India

The Air Transport Association (ATA) is suing the Export-Import Bank of the U.S. (Ex-Im Bank) to stop $3.4 billion in loan guarantees the bank is offering to Air India for the purchase of Boeing aircaft.

The suit, filed in U.S. District Court for the District of Columbia, claims the bank is failing in its statutory obligations by offering the loan guarantees. The Ex-Im Bank has approved $1.3 billion in loan guarantees and $2.1 billion in preliminary financing commitments to Air India to buy 30 Boeing aircraft.

The airline trade group claims financially struggling Air India could default on the loan, leaving U.S. taxpayers responsible for the bill. “The Ex-Im Bank decided to provide billions of dollars in loan guarantees without fully considering whether that carrier will be able to repay its debts,” the court filing says.

ATA argues the loan guarantees would harm the U.S. airline industry by providing Air India access to aircraft at more favorable financing rates than those available to U.S. carriers. Furthermore, this loan would increase available seats on routes that U.S. airlines serve, putting the U.S. industry at a competitive disadvantage, which is a dereliction of the Ex-Im Bank’s mandate, ATA claims.

Earlier this year, changes in the rules for the Organization for Economic Cooperation and Development in theory leveled the playing field for access to export credit agency (ECA) support. Before the change in the so-called “home market rule,” U.S. airlines were barred from receiving loan guarantees from Ex-Im Bank for Boeing aircraft, and European airlines could not secure ECA financing from European export support banks. Boeing and Airbus supported this rule. At the time, ATA argued that ECA support functioned as a virtual subsidy, allowing foreign carriers more favorable financing for aircraft (Aviation Daily, Oct. 11, 2010).

ATA claims Ex-Im Bank has provided more than $52 billion in loan guarantees to non-U.S. carriers in the past 10 years, and this has forced U.S. airlines to cut routes and capacity, at the cost of 4,100-7,500 U.S. airline jobs. “While we support the goal of expanding U.S. exports, it cannot come at the expense of U.S. companies and U.S. jobs,” says ATA President Nick Calio.

Air India lenders OK fin restructuring plan

A consortium of lenders to state-run Air India has broadly approved its financial restructuring plan, a move that would come as a huge relief for the cash-strapped airline, a source with direct knowledge of the development said on Monday.

The lenders' consortium plans to seek "minor clarification" from the country's central bank on the restructuring plan, the source said, after a meeting of the lenders of the troubled carrier in New Delhi.

Last week, the Reserve Bank of India (RBI) had approved extension of the tenure of loans to the state carrier by five years with the loans now being due for repayment after 15 years.

"Banks raised couple of clarifications from the Reserve Bank of India...now State Bank of India, which is the leader of the consortium, will take those up with RBI," the source said.

"The banks will now start their internal process of formal approval."

Air India was in talks with banks to restructure its working capital debt of about $4 billion and is in the midst of implementing a turnaround plan with a hub-and-spoke route model focus, cut costs by redeploying staff and unload non-core real estate.

The civil aviation ministry will prepare a cabinet note on the turnaround plan in the next few days, the source said.

Saddled with a total debt of around $9 billion, Air India has posted a net loss before tax of 70 billion rupees for the year ended March, according to government estimates.

The government plans to infuse 67.5 billion rupees by way of equity in Air India over 10 years. It also plans to back Air India's aircraft buys worth 170-180 billion rupees over the next 10 years, the source added.

Earlier in November, a U.S. airline body sought to block $3.4 billion in pending taxpayer-backed loan guarantees for Air India to buy Boeing Co jetliners.

Air India had ordered up to 50 long-range Boeing jets worth about $6 billion in 2005.

The government would cover 45 billion rupees of Air India's accumulated losses, the source said.

He said the national carrier plans to sell and lease back Boeing 787 dreamliners to cut its debt.

A consortium of as many as 26 banks, including State Bank of India, IDBI and Bank of Baroda, have exposure to the carrier.

India's airlines are struggling with surging oil prices, high sales tax on jet fuel and below-the-belt pricing due to increased competition, leading to massive losses.

According to the Centre for Asia Pacific Aviation, Indian airlines are on course to post record losses of more than $2.5 billion for the year ending March 2012, with Air India likely to account for more than half of this.

Investors have become wary of an industry that, just a few years back, ordered hundreds of aircraft in an ambitious bet on the future.

Kingfisher Airlines, India's third largest, has cancelled scores of flights this month, as its net worth eroded, prompting it to approach lenders for a cushion to ease its debt burden.

Chiefs of beleaguered Indian private airlines on Saturday met Prime Minister Manmohan Singh seeking his intervention to help the carriers tide over the deep financial crisis and were assured that "legitimate" grievances would be considered, the Press Trust of India reported.

Air India To Leaseback Boeing 787s

Cash-strapped Air India’s board has approved a sale-and-leaseback option for its 27 Boeing 787s on order.

“The Air India board has approved issuing of a Request for Proposal for the Boeing 787 aircraft under a leaseback mechanism pending a final clearance from the government,” an airline spokesperson said.

The leaseback arrangement will help Air India to make full use of the asset while not having capital tied up.

The national carrier will also lease out two Boeing 747-400s and some 777-200 long-range aircraft after it inducts the Boeing 787 aircraft, an airline spokesman said after the board members met Tuesday to review the company’s operations and its financial turnaround plan, which was recently approved by the country’s central bank.

Boeing is expected to start delivering 787s from December, after a delay of almost two years. However, there is no confirmation on the date when the aircraft will join the Air India fleet.

India’s federal cabinet is reviewing the purchase, looking at the financial health of the company. There is speculation that the government may approve the purchase of just 14 of the 27 aircraft ordered in 2005.

In Tuesday’s meeting the board members also reviewed the decision of the 14-bank consortium, led by State Bank of India, to approve the debt restructuring program for the airline.

Last week the Reserve Bank of India approved extension of the tenure of loans to the state carrier by five years with the loans now due for repayment after 15 years.

India’s federal government is planning a 300 billion rupees ($5.7 billion) aid package for Air India.

On Monday, civil aviation ministry officials, representatives from the airline and 14 lender banks finalized a bailout package, which is expected to roll-out over a period of 10 years.

The government is also planning to write off a cash loss of 45 billion rupees accrued by Air India and infuse an additional equity of 67.50 billion rupees and 170 billion-180 billion rupees for the airline’s fleet acquisition program, according to a civil aviation ministry official.

The total debt of Air India, consisting of aircraft loans and working capital loans aggregate 438 billion rupees. The working capital loan is 215 billion rupees while the aircraft loan is 214 billion rupees, latest figures show.

Indian Airlines Struggles With Deep Troubles

Although spiraling jet fuel costs, plummeting profits and high debt levels are threatening the survival of its domestic carriers, India’s burgeoning demand is expected to pull the beleaguered aviation sector through the current turbulence.

Among the country’s six major airlines—Jet Airways, Kingfisher Airlines, SpiceJet, Indigo Airlines, GoAir and national carrier Air India—only discount carrier Indigo is making a profit. Kingfisher Airlines, which calls itself “King of Good Times,” lost its scepter and throne to high fuel costs and the price war among airlines. Its shortage of cash hinders its ability to buy fuel and pay salaries, airport charges and interest to its lenders.

In November, Kingfisher was forced to cut several unprofitable flights from its network in an attempt to reduce losses, given high fuel costs. The airline, owned by billionaire liquor baron Vijay Mallya, has been talking with lenders to raise capital and trim $1.2 billion in debt. It posted a second-quarter net loss of 4.69 billion rupees ($90 million), compared with a net loss of $44.5 million a year earlier.

The airline’s debt hit rock bottom in October and state-run oil refiner Hindustan Petroleum Corp. Ltd. temporarily suspended fuel deliveries to Kingfisher Airlines for the second time in four months. To add to its woes, the New Delhi and Hyderabad airports threatened to deny the airline credit and demand upfront cash payments for using their facilities.

The heavy losses also forced Kingfisher to shut its no-frills segment, Kingfisher Red, in September.

Similar problems have befallen other Indian carriers. Jet Airways, India’s top airline by market share, posted a net loss of $138 million for the quarter ended Sept. 30, compared with $2.4 million a year ago. Budget airline SpiceJet also reported a net loss of $46 million. State-run Air India, which has a cumulative debt of $7.7 billion from aircraft acquisitions and short-term loans to maintain its operations, has been asking for a total of $3.2 billion.

The Center for Asia Pacific Aviation (CAPA) predicts a $2.5-3 billion loss for Indian airlines in the fiscal year ending in March. According to CAPA estimates, the cumulative debt burden of the three big Indian carriers—Kingfisher, Air India and Jet Airways—was a whopping $16 billion. “Indian banks have an exposure of $6 billion related to working capital and term loans. They will have an additional exposure on the aircraft-related financing,” says Kapil Kaul, South Asia chief executive of CAPA.

There are several reasons why India’s aviation industry, once the symbol of economic growth, is in turmoil. While India is among the countries with the fastest-growing passenger traffic, high fuel costs and the inability to raise fares have resulted in huge losses over the past three quarters. The steep increase in global oil prices hits Indian carriers particularly hard because they must pay government fuel taxes at rates up to 30%. Airlines complain that fuel prices are almost double global rates and account for 40-45% of operational expenses, compared to 18-20% abroad.

The increasing sales tax on air tickets also negatively affects the country’s civil aviation industry. Despite campaigns stating that the tax flouts International Civil Aviation Organization (ICAO) policies, the Indian finance ministry extended the sales tax to all classes of domestic and international airline tickets. Previously, the tax was only levied on international premium-class tickets.

High salaries for pilots and crewmembers also drive up carriers’ costs, even though there was no rapid hike in salaries after the recession in 2009.

While costs have increased, revenue has decreased for many of the Indian airlines. They boosted capacity by leasing more aircraft and opening new routes, which caused per-seat profits to nose-dive. The carriers also added expensive aircraft to their fleets too quickly without putting their balance sheets in order for tough times.

On top of this, the depreciation of the Indian rupee has resulted in bulging costs.

To stay afloat, Kingfisher Airlines and Jet Airways both need infusions of capital, according to their respective auditors. B.K. Ramadhyani & Co., which audits Kingfisher, says the carrier’s ability to meet its financial obligations is “dependent on the company’s ability to infuse the requisite funds.” Similarly, auditors Deloitte Haskins & Sells and Chaturvedi & Shah say raising funds is essential if Jet Airways’ accounts are to be prepared on a “going-concern” basis in the future.

Jet Airways plans to give $9.6 million of interest-free loans to its JetLite unit by the end of March as an immediate measure to enable the unprofitable subsidiary to continue operating.

Even Kingfisher tried to stem worries about its future by listing a few options that could help it through the turbulent times. Mallya says the airline’s net worth has eroded, but it has not asked for a bailout from either the government or banks. Rather, it wants lenders to inject working capital of $154 million as short-term relief. The airline restructured its debt earlier this year by converting one-third of its loans into shares and issuing them to lenders and founder companies.

Mallya says the airline has initiated a large-scale aircraft reconfiguration and transition to a full-service model, along with network rationalization, to reduce interest costs and streamline existing fleet orders.

Rationalizing their operations is something the airlines can control, but another major challenge—outdated infrastructure including shoddy runways and air traffic management systems that desperately need upgrading—is beyond their control.

India’s government could provide relief for its domestic airlines if it reduced the high jet fuel tax and opened the aviation sector to investment by foreign airlines, which could not only bring in funds but also help improve management practices.

There is hope of government support for the struggling carriers. “The private-sector airlines have to be managed efficiently but if they do get into difficulties, we have to find ways to help them,” Prime Minister Manmohan Singh says.

India’s commerce and industry minister, Anand Sharma, says a civil aviation ministry proposal to assist the strapped airlines is “receiving government’s active consideration.” Some analysts think it is highly likely to approve it soon.

“The Indian government will have to eventually open up the sector, but to what extent is not yet clear,” Dhiraj Mathur, aerospace executive director at PricewaterhouseCoopers, tells Aviation Week.

Currently, Indian law permits up to 49% foreign investment in airlines and more in airport infrastructure. However, foreign airlines are not allowed to invest in the sector, something Kingfisher’s Mallya is calling for the government to change.

Not everyone agrees with Singh’s support of the carriers, though. Among them is Ajay Lele, a former Indian air force wing commander who works with the New Delhi-based Institute for Defense Studies and Analyses. “The airlines are responsible for their own mismanagement and need to deal with it themselves,” Lele tells Aviation Week.

He says Indigo is generating profit and growing rapidly because of efficient management and prudent fund-raising.

“The private industry cannot have an extravagant life and rely on the government to take care of their losses. It already has Air India to take care of,” Lele says.

The government is considering a variety of plans to restructure Air India—a relic of state ownership that is threatened by losses, bloated costs and severe competition from the private domestic airlines. India’s central bank is expected to submit a report this month recommending a fresh turnaround plan for the national carrier, which incurs monthly losses of more than $115 million in addition to its deep debt from aircraft acquisitions and short-term loans to maintain operations.

In the past two years, the government has pumped $482 million into Air India, and the ministerial panel is looking at injecting another $1.2 billion over the next 10 years.

The silver lining if the dark cloud hanging over India’s civil aviation sector is that government figures show an increase in domestic air passengers to 51.6 million in 2010 from 11.7 million in 2003. The Airport Authority of India (AAI) estimates that India will become the third-largest aviation market in the world after the U.S. and China, rising from its current ranking as ninth.

According to the AAI, India will have 150 airports and a fleet of 2,000 aircraft by 2030. The country’s fleet now stands a 735 aircraft owned and leased by public and private aviation companies.

And, with the International Air Transport Association also forecasting that the Indian civil aviation market will record a compound annual growth rate of more than 16% in 2010-13, it is clear that the once booming industry is not crash-landing.