AI partner to have a say in choice of new plane — Ananth

The selection process for a strategic partner, which has already been initiated, is part of the disinvestment package in which 40 per cent shares are to be held by this partner.

On the selection of the type of aircraft, the minister said the final decision had been left to the airline itself, though it should also take into account "passengers’ appeal".

There should be no bar on the various types of planes the AI should study, he said when asked whether the carrier would select a medium capacity long range (MCLR) or a small capacity long range (SCLR).

The AI, which was looking for a MCLR since about five years, started asking for SCLR few months ago primarily because the customers sought non-stop, point-to-point transfers instead of flying via some other places.

One of the basic differences between these two aircraft concepts is that SCLR has about 50 seats less than the 300-seater MCLR. The SCLR concept of AI specifies that the plane should be 250-seater with a flying range of 6,000 nautical miles.

The AI, having a fleet of 26 aircraft, plans to sell off at least seven Boeing-747S Which were about 20 years old and three Airbus-300S aged about 18 years.

Major aircraft manufacturers, Airbus Industrie and Boeing, have made presentations before the AI board last month to sell their latest products – A330-200S and B-767S.

A Rs 1,000 crore government sanction was to be cleared by the Union Cabinet for the cash-strapped AI primarily for fleet upgradation. However, it is not clear whether this could come about now with the election commission’s model code of conduct coming into effect.

The carrier, which is in dire need of about Rs 3,000 crore worth of government infusion, has been directed to seek out a strategic partner as a condition for the much-needed funds to be released, aviation sources said.

Apart from business synergies of strategic partnership, there are also operational synergies that would benefit both.

For high labour costs and land-starved home bases of foreign airlines like British Airways, Lufthansa or Singapore Airlines, labour-intensive functions such as passenger revenue accounting and aircraft heavy maintenance could be relocated to India with a view to lower the unit operating cost and making AI more competitive or profitable, the sources said.

The identification of the right strategic partner and the timely implementation of the partnership was the most practical and cost-effective formula for turning around the AI, the sources said and stress that with the `open sky’ policy, the carriers need to become multinationals to harness the synergies to remain in business.