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At last, Air India goes for the Boeing

Thursday 28 April 2005

It has taken a decade for Air India (AI) to firm up its plans for modernising its fleet. After successive regimes at the Centre dragged their feet on the issue, the decks have now been cleared for the Government to set its seal of approval on the Air India Board’s decision to go in for three types of Boeing aircraft - eight B777-200 LRs, 15 B777-ERs and 27 B787s. The $ 6 billion deal will bring great relief to the national carrier, which has been hamstrung for want of aircraft. Even these 50 planes of ultra-long range, medium haul and medium long-range versions from the American aircraft manufacturer may be delivered from 2006 to as late as 2013. The delivery schedule will be finalised when the deal is ultimately clinched with Boeing. Though the much-delayed Board’s decision on the aircraft acquisition programme ends the suspense, it has also sparked a debate on the choice of aircraft. Should AI have put all its eggs in one basket, or could it have gone in for a mix of Airbus and Boeing?

There has obviously been a balancing act when one looks at the big picture. Since Indian Airlines has gone in for a full complement of Airbus aircraft, AI has plumped for the Boeing - 35 firm orders and 15 optional. Obviously, there has been considerable lobbying by Washington for the Boeing and it is quite likely that the contract will be signed during the proposed visit of President George Bush. The question that Airbus Industrie has raised is whether changes were made in the aircraft acquisition parameters. Similarly, Boeing 787 may not be delivered before 2009 and 27 of the 50 aircraft to be bought are of that type. The last ditch attempt by Airbus, which has also complained of unfair evaluation, appears to be aimed at getting at least a slice of the big order and the AI decision has the potential to spark a commercial spat between the European Union and the U.S.

It must be remembered that negotiations have to commence on the pricing and the full deal with Boeing. Air India has also begun discussions on funding, but these may not pose a problem. Both the Indian Airlines and AI decisions on aircraft acquisition are now before the Government for final clearance. Minister of State for Civil Aviation Praful Patel has made it clear that his Ministry would rely on the judgment of the airlines. Without adding to the delay, the Cabinet must clear both the acquisition programmes promptly so that the two national carriers get the fleet they want to become more competitive and make the best of the spate of open skies agreements that are being signed with various countries, including most recently with the U.S. So long as the right type of aircraft is acquired from one or the other of the two reputed manufacturers and the financial package is attractive, Air India will be equipping itself well to fly out and compete in the open skies. The approval of the deal will provide the much-needed boost to the national carrier.

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