Govt clears IA-Airbus Rs 9,890-crore deal

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New Delhi, Sept. 8

FINALLY it took all of four hours of hectic negotiations at the office of the Finance Minister here last Tuesday to seal the five-year-old 43-Airbus aircraft fleet acquisition plan of Indian Airlines.

The tone for the crucial meeting, which eventually got India a discount of Rs 347 crore on the more than Rs 10,000-crore deal was set by Finance Minister Mr P. Chidambaram, who while acknowledging that the deal had been a long time in the making asked all concerned to take the proposal forward in a spirit of cooperation in an effort to find common solutions.

The meeting was conducted in a "professional and in-depth" manner with the entire acquisition project being viewed on the benefits that it could bring not only to IA, but the aviation industry and the country as a whole, apart from the aircraft and engine manufacturers.

The four-member Ministerial team that included Ministers for Law, Plan Implementation and Aviation apart from Mr Chidambaram is said to have raised issues and questions that normally would be expected from an airline CEO.

For instance, the Ministers who were familiar about what price IA would be paying during the five-year delivery period raised well-informed questions about the complex issue of price escalation.

In the end there was some give and take on both sides but by about 8 p.m. the two sides were said to have reached an "understanding".

Watching and participating in the proceedings were the Secretary Civil Aviation, Mr Ajay Prasad, Deputy Managing Director of IA, Ms Sushma Chawla, from India.

On the other side the delegation included Mr David Zeigler, the grandson of the former CEO of Airbus Industrie who had signed the first agreement for the sale of an Airbus aircraft to India on December 30, 1974.

The final details of the current deal were, however, spelt out only the following morning after the Ministers had held discussions with Prime Minister, Dr Manmohan Singh.

It was left to Dr Singh to announce at the joint press conference with British Prime Minister, Mr Tony Blair that the Indian Government had cleared the $2.2-billion fleet acquisition plan of IA.

For the record, the deal will now cost IA Rs 9,890 crore down from the earlier estimated cost of Rs 10,237 crore. In effect each aircraft will now cost the airline around Rs 230 crore.

Besides, Airbus and engine manufacturer CFM have agreed to increase counter trade commitment to 40 per cent from the earlier 30 per cent and the European aircraft manufacturer has also agreed to set up a maintenance, repair and overhaul facility and set up a pilot training centre.

IA is to acquire 19-Airbus A-319 aircraft each of which is capable of seating 122 passengers while each of the 20 Airbus A-321 aircraft will be able to seat 172 passengers.

The airline is also to acquire four A-320 aircraft each of which is capable of seating 140 passengers.

(This article was published in the Business Line print edition dated September 9, 2005)
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