Indian Airlines-Air India deals: CBI files three FIRs, launches preliminary enquiry

The Union Cabinet had cleared the Indian Airlines-Air India merger proposal in March 2007.

By: Express News Service | New Delhi | Published: May 30, 2017 1:58 am
air india, ai air india merger plan, indian express The Union Cabinet had cleared the Indian Airlines-Air India merger proposal in March 2007.

The Central Bureau of Investigation (CBI) has registered three FIRs and launched a preliminary enquiry to probe alleged irregularities in Indian Airlines-Air India merger and purchase of 111 aircraft, leasing of planes and giving-up of profit-making routes by Air India. These decisions, according to the CBI, caused a loss to the tune of thousands of crores of rupees to the exchequer.

The Union Cabinet had cleared the Indian Airlines-Air India merger proposal in March 2007. NCP leader Praful Patel was the civil aviation minister when both the merger and acquisition of Boeing aircraft to expand fleet took place. CBI spokesperson R K Gaur said the FIRs have been registered for offences of criminal conspiracy and corruption against unidentified officials of the ministry and Air India. The cases relate to decisions taken by the ministry during the tenure of the UPA government causing a loss of “tens of thousands of crore” of rupees to the exchequer, he said.

A preliminary enquiry has been registered to probe the merger, while 3 FIRs have been lodged to probe alleged irregularities in the purchase of 111 aircraft, leasing of planes while acquisition process was still on, and giving-up of profitable routes in favour of national and international airlines by Air India, Gaur said.

In a report tabled in Parliament in January 2012, CAG had flagged these irregularities and called the decision to acquire 111 planes by Air India “a recipe for disaster”, which should have raised alarm in the government. It said the aircraft acquisition through debt had “contributed predominantly” to the airline’s massive debt liability.

CAG had also called the merger of Air India and Indian Airlines “ill-timed” and pointed out that “the financial case for the merger was not adequately validated prior to the merger”.

“The entire acquisition (for both Air India and Indian Airlines) was to be funded through debt (to be repaid through revenue generation), except for a relatively small equity infusion of Rs 325 crore for Indian Airlines. This was a recipe for disaster and should have raised alarm signals in Ministry of Civil Aviation, Public Investment Board and the Planning Commission,” the report said.

The CAG also flagged the “speed” at which the acquisition process for 68 aircraft was dealt with and observed that it was based on “flawed” assumptions.

Given that the initial proposal was made in December 1996, CAG had said that acquisition process took an “unduly long time” and only in January 2004 a plan was made to buy 28 planes, which was revisited and later increased to 68 aircraft.

“This increase in numbers does not withstand audit scrutiny, considering the market requirements obtaining then or forecast for the future, as also the commercial viability projected to justify the acquisition. The acquisition appears to be supply-driven”, the report had said.

Terming the merger “ill-timed”, the report had said this exercise was undertaken “strangely from the top (rather than by the perceived needs of both these airlines), with inadequate validation of the financial benefits”.

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  1. K
    kulaputra kulaputra
    May 31, 2017 at 3:49 am
    It was ensured that our national airline - the one that carried most passengers out and in was Emirates. It has got MFA (Most favoured airline) status with department of civil aviation. 3 flights per day from most airports ad 5 per day from Delhi and Mumbai.
    1. P
      Pradip Naik
      May 31, 2017 at 12:34 am
      Air-India was once a profitable airline. During 53 out of 67 years of Congress rule in India, ru party was corrupt & the govt officials don't know how to run the cos & they have no forsight. Ordering 787 dreamliners was a disaster. You have to order wide-body a/c like A380, 747-8 & 777-300/300ER for the future growth. AI most profitable routes were Nairobi & Gulf Sectors so as Malaysia & Singapore sectors. AI withdrew NON-STOP flight between JFK & Mumbai. That was a big mistake. If you operate NON-STOP 747-8 daily & round the year, the flight will go full.
      1. C
        May 30, 2017 at 5:19 pm
        Air India is a white elephant apart from all these things their staff should know to serve/treat all the customers properly I emphasize once again ALL the customers. They should change their mind set then only it can improve their coffers nothing else. One mis behaved with the staff and escaped with apology that only can happen on this air line that shows how they discriminate customers on the basis of color,power,gender etc. Jaihind
        1. A
          May 30, 2017 at 11:53 am
          Corrupt ministers n officials in UPA regime got together to improve their conditions at the expense of the country exchequer. Middle East air lines like Emirates, Air Arabia, Etihad, Qatar airway, etc. Each operate more than 2 flights daily before 2010 to Indian cities but AI was significantly absent. These corrupt people for selfish gains caused immense damage to the country. I request Mr. Modi government to take appropriate steps to eliminate corruption in the country.