The Hindu Business Line : IA fleet acquisition plan gets PIB approval

INDIAN Airlines (IA) on Wednesday moved a step closer towards achieving its fleet acquisition programme with the Public Investment Board (PIB) clearing the state-owned airline's proposal to purchase 43 new Airbus aircraft.

"We have cleared the proposal for approaching the Cabinet Committee on Economic Affairs (CCEA). This is something which will be done by the nodal Ministry (the Ministry of Civil Aviation)," the Secretary, Expenditure, Mr D. Swarup, told newspersons shortly after the over two-hour long meeting ended.

All public sector companies need to seek the approval of the PIB before implementing any large investment decisions.

Interestingly, the delay in obtaining the PIB's approval - owing to the change in regime at the Centre - appears to have helped IA. For the airline, the project cost of the acquisition has come down by as much as Rs 614 crore due to exchange rate fluctuations.

Sources indicated that while the US dollar was being quoted at Rs 49 when the IA board approved the proposal, it is now being quoted at around Rs 46, thus helping in bringing down the cost of the project.

On the issue of the Government providing sovereign guarantee to the airline for acquiring the aircraft, Mr Swarup said: "The PIB would recommend to the Government that a sovereign guarantee should be provided."

Asked about the Government providing additional equity to the airline, Mr Swarup said that there already was a CCEA decision to provide Rs 325 crore to IA. The proposal links additional equity infusion into the airline to its fleet acquisition plan.

Sources indicated that almost 90 per cent of the fleet acquisition costs is to be funded through the external commercial borrowing route.

The IA Board had cleared a proposal for purchasing 43 Airbus aircraft, including A-321s, A-320s and A-319s, in March 2002 at an estimated cost of Rs 10,089 crore. The airline plans to induct 19 A-319s, four A-320s and 20 A-321s aircraft.

While 70 per cent of the 43 aircraft, which are to be inducted, are for replacing IA's ageing fleet, 30 per cent is for capacity enhancement.

Among the aircraft that will be phased out are 11 Boeing 737s, 15 Airbus A-320s , which are on lease, and three Airbus A-300s.

The last tranche of Airbus A-320s that the airline purchased arrived in 1994, official sources said.