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Air India's 787 dream unlikely to become a reality

Last updated on: February 27, 2012 11:01 IST

Air India's 787 dream unlikely to become a reality

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Mihir Mishra in New Delhi

Air India may not induct the much-anticipated Boeing 787 Dreamliner planes after all. The civil aviation ministry is discussing a proposal to sell the 27 medium-haul aircraft, which will attract a substantial premium, compared to the 2005 cost.

The profits from the sale, if the proposal is cleared, could make AI richer by over Rs 7,200 crore (Rs 72 billion), equivalent to a third of its accumulated losses pegged at Rs 20,000 crore (Rs 200 billion).

After a delay of over three years, Boeing is expected to deliver seven Dreamliners this year. The move would also help AI to shore up its balance sheet.

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Image: Air India may not induct Boeing 787 Dreamliner after all.
Photographs: Reuters

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AI was the second airline to order these aircraft in 2005, at Rs 703 crore (Rs 7.03 billion) apiece. The price of the aircraft has gone up by 37 per cent since, at Rs 970 crore (Rs 9.7 billion) a plane.

If it takes delivery and sells all the planes, it would make a profit of Rs 7,200 crore (Rs 72 billion) over a couple of years, depending on the delivery schedule.

Even if the government decides to sell the seven aircraft slated to come this year, it would make Rs 1,800 crore (Rs 18 billion). A top official in the ministry says there are two reasons why they are discussing the proposal - one, Dreamliners are facing technical problems; and two, the airline would improve its bottom line through a sale.

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Image: AI was the second airline to order these aircraft in 2005.
Photographs: Reuters

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"There are problems in Boeing 787 Dreamliners. Even All Nippon Airways, the launch customer for Dreamliners, is facing problems with the aircraft.

"We do not plan to cancel the order, as the price of the aircraft has hugely appreciated. Various proposals are being discussed at this stage," he said.

Air India, as part of its 111 aircraft order in 2005, had ordered 27 Dreamliners. Reportedly, All Nippon Airways faced a landing-gear deployment problem in one of its 787s. Boeing also announced at the Singapore Air show around 55 Dreamliners had the potential to develop a fuselage shimming problem, but reiterated the fault was being fixed.

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Image: Air India had ordered 27 Dreamliners.
Photographs: Reuters

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The final decision on the delivery is to come from the Cabinet. A Group of Ministers on the carrier, headed by Finance Minister Pranab Mukherjee, had formed a group of officers to decide on the status of plane purchases. The group suggested pruning the order to 14 aircraft.

However, Air India wants the deliveries to come soon, as that is an integral part of its turnaround plan. Over 85 per cent of AI's operations are to short-haul and medium-haul sectors and it does not have a fleet of medium-haul aircraft.

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Image: The final decision on the delivery is to come from the Cabinet.
Photographs: Reuters

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"We are operating medium-haul sectors with long-haul planes or short-haul planes, ultimately making many routes unprofitable for us," said a senior AI official.

The official added Dreamliners required less maintenance cost, making it a good deal for them.

"With Dreamliners, we also plan to launch flights to Australia and increase our frequencies in the short-haul international sector."

Air India and Jet Airways are the two Indian carriers to have ordered Boeing 787s. AI's delivery was to start from January 2012 but is stuck due to approval from the government. Jet Airways' delivery is to begin in 2014.

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Image: Air India and Jet Airways are the two Indian carriers to have ordered Boeing 787s.
Photographs: Reuters

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