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Home > Business > Business Headline > Report

Govt may not give cover for IA plan

BS Bureau in New Delhi | November 10, 2004 14:18 IST

The finance ministry is against providing a guarantee to the Indian Airlines to raise funds for its proposed fleet expansion. Senior finance ministry officials said they would oppose the proposal to buy 43 aircraft, when it came up before the Public Investment Board.

Subsequent to the PIB meeting, a high-powered committee of officials was to begin price negotiations with aircraft-makers. The Central Vigilance Commission had also given the green signal to open price negotiations with the lowest bidder, sources said.

The earlier meeting of the PIB to vet the Indian Airlines's fleet plan was slated for January this year. However, it was put off due to the general elections.

The Indian Airlines board had approved the proposal for the first time at its meeting in March 2002.

Subsequently, the government asked the airline to reconsider the proposal as the market conditions had changed considerably since the decision.

The airline then decided to induct nine wide-bodied aircraft on lease. Following this, the civil aviation ministry approved the original fleet acquisition plan.

Negotiations with the aircraft manufacturers could begin early next year for the acquisition which was likely to cost Rs 10,089 crore (Rs 100.89 billion), the sources said, adding that work was on in full swing to finalise documents to be presented to the PIB.

Sources said the fleet acquisition plan of Air-India was also likely to be finalised by this month-end. While Indian Airlines plans to buy 43 aircraft -- a mix of Airbus 319s, 320s and 321s, Air-India's plans are still being given a final shape.

The acquisitions by Air-India are likely to cost over Rs 11,000 crore (Rs 110 billion).

Till the time the actual deliveries began in the next three to four years, the two public-sector carriers would continue to lease planes to augment their fleet strength and add capacity on new routes.

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