NEWS
Air India may sell the Boeing 787 Dreamliners at a premium to cut losses. The Civil Aviation Ministry is discussing a proposal to sell the 27 medium haul aircraft, which will attract a substantial premium, over the cost quoted in 2005. The profits from the sale, if finally approved by the government, could make Air India richer by Rs. 7,200 crore, equivalent to a third of its accumulated losses pegged at Rs. 20,000 crore. After a delay of over three years, Boeing is expected to deliver seven Dreamliners this year. If it takes delivery and sells all the 27 planes, it would make a profit of Rs. 7,200 crore over a couple of years, depending on the delivery schedule.

VIEWS
The Boeing 787 Dreamliner is a twin-engine, long-range, wide-body jetliner with a capacity ranging from 210 to 290 passengers. Its airframe is made largely of composite materials and is the world’s first major airliner to employ this technology. Extensive use of composites has made the aircraft much lighter and combined with new generation engines, offers a higher degree of fuel efficiency compared to other aircraft in its class. Induction of the aircraft would have helped Air India leapfrog into the next generation. Unfortunately the national carrier now has other plans.

Originally scheduled to enter service in May 2008, the project has been delayed due to unforeseen problems associated with development of new technologies. However, flight testing was completed mid-2011 and the Dreamliner entered commercial service with All Nippon Airways on October 26, 2011. By this time, the 787 programme had logged 873 orders from 57 customers.

Air India was the second airline to order this aircraft. The deal for 27 aircraft. signed in 2005 carried a price tag of Rs. 703 crore each. Since then the price of the Dreamliner has gone up by 37 per cent and now stands at Rs. 970 crore apiece. Around 2006-07, symptoms of serious financial distress began to appear and by March 2011, the airline had accumulated a debt of Rs. 42,570 crore and operating loss of Rs. 22,000 crore. A major exercise at restructuring was launched a few years ago but there appears to be no perceptible change in the health of the airlines. Today, the airline is unable to pay salaries or fulfil its obligations to its debtors with any degree of certainty. Being a government-run organisation, Air India is overstaffed, has low productivity and is bedevilled by labour disputes and continual interference by the government. Severely handicapped with the legacy of the public sector, it is clearly not able to compete in the market against the private carriers.

In September 2011, Vayalar Ravi, the then Minister of Civil Aviation, disclosed that as Air India was over-burdened by debt, the airline did not have the resources to pay for the 27 Boeing 787 on order. For Air India, finding ways to reduce the size of cumulative loss attained high priority. Apart from a claim on Boeing for $1 billion ( Rs. 5000 crore) for the delay in the delivery of the Dreamliner, the management of the airline explored different options to exit the deal for the aircraft that undoubtedly was the best; but given the financial mess in the airline, it had become unaffordable. One of the options evaluated was to cut down the size of the order from 27 to 12 aircraft. The other was to change the order to single aisle narrow body aircraft in place of the twin-aisle wide body Dreamliners.

On November 30, 2011, Air India’s board approved a saleand-leaseback option for the fleet in question and after final clearance by the government, will proceed with further steps. Cancellation of the order was never an option.