Air India to lease over 100 more planes, double fleet

The government has decided to almost double Air India's fleet by adding over 100 aircraft, but without burdening the exchequer with a mammoth debt burden like last time. The airline will grow by leasing aircraft instead of purchasing them as was done during the Congress-led UPA government.

"AI will induct 100 more aircraft in the next four years. We have decided not to seek any additional budgetary support except for the turnaround plan approved for the airline earlier. The airline will lease aircraft and has the resources to make the payment for leasing," aviation secretary R N Choubey told The Times of India.

Financial support of Rs30,231 crore was approved for AI in 2012. Of this, it has received Rs22,280 crore till March 2016 while another Rs1,713 crore was to be given in FY16-17. The Modi government has decided that the airline's growth plan will not lead to any enhancement in this equity support.

AI has 118 planes, of which 41 are wide-body, used on long-haul and a few domestic routes, 66 are narrow-body, used on domestic and nearby international routes, and 11 regional jets. Of these, 77 planes are owned by the airline, 22 were sold and leased back and 19 are leased.

By 31 March 2020, AI is looking at a fleet of 232 as some planes from the 111-aircraft order placed in 2006 are yet to be delivered. AI will take on lease 40 more Airbus A-320s for the erstwhile Indian Airlines that serves domestic and nearby international routes.

It will order about 35 turboprops. And AI Express, which currently has 17 Boeing 737s, will get 18 more B-737.

"The airline is on track as far as its financial and operational improvement is concerned. It had an operating profit last fiscal and will be in net profit by 2019-20," said Choubey. However, the recent spurt in oil prices could be a cause of worry, he added.

"AI management is talking to banks for debt restructuring," Choubey said. The airline's total loan is about Rs50,000 crore, of which Rs28,000 crore is working capital loan at an interest rate of 10 per cent. It is seeking to convert this working capital loan to a 7 per cent Life Insurance Corp loan. Switching Rs10,000 crore will lead to a saving of Rs300 crore annually in debt servicing. The annual debt servicing cost is Rs4,000 crore.