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Civil Aviation Minister Praful Patel on Wednesday announced that the Union government has approved the Rs 9,890 crore (Rs 98.90 billion) deal to purchase 43 Airbus aircraft by Indian Airlines.
The aircraft to be inducted are 19 Airbus A 319s, Four A 320s and 20 Airbus A 321s.
Speaking at a news conference in New Delhi, Patel said after the Empowered Group of Ministers completed the final round of price negotiations with Airbus Industrie, which yielded a further discount of Rs 357 crore (Rs 3.57 billion), it was formally approved by the Prime Minister Manmohan Singh. Against an earlier negotiated net project cost of Rs 10,237 crore (Rs 102.37 billion) finalised by the Price Negotiating Committee in March 2005 and supervised by a special committee headed by former CAG and CVC C G Somaiah, the E-GOM drove it down further to Rs 9,890 crore. Overall the price reduction was 3.4 per cent.
As part of the package, Airbus Industrie earlier reduced the price by $63.2 million covering aircraft and CFM engine. In the second round of negotiations conducted by E-GOM on September 6 a further concession approximating $75.8 million was extracted from the European consortium manufacturing Airbus aircraft.
On the sidelines of the conference he informed, "Anyone can now go through the deal with a toothcomb. It is the best we got. We have even been given guarantees by the manufacturer to that effect and includes an integrity clause, and most favoured clause. Of course, these are, however, not tangible in monetary terms."
Patel said that Airbus Industrie has increased the counter-trade offset element from 30 per cent to 40 per cent. This will mean an additional investment of $145 million to India. Asked if the counter-trade will be with only France or other members of the consortium as well who include Britain, Germany and Spain, Patel said it is for the commerce ministry to work out the modalities.
Further, Airbus Industrie has agreed to support and establish an ultra modern training centre for pilots to fly Airbus aircraft and this will include installation of modern simulators. Considering the pilot shortage, this will be very useful he said and added this will also involve an investment of $75 million.
Besides, Airbus will also help in establishing a spare part warehouse in India which not only will meet the requirement of Indian Airlines but also other airlines flying Airbus aircraft. The investment in this has, however, not been quantified. The manufacturer will assist a consortium of promoters to set up a most modern MRO facility (Maintenance, Repair and Overhaul) involving an investment upwards of $100 million.
Considering the pulls and pressures of coalition politics and when asked if any location has been identified for the MRO, Patel said it is too early to say. In any case Airbus will only be assisting the consortium of promoters to set Indian Airlines existing Central Training Establishment at Hyderabad and whether the CTE will be modernised, Patel merely said pilot training facility will be for everyone and not IA centric.
He, however, clarified that the MRO will provide for A, B, C, D checks. Currently, all airlines in India send their aircraft irrespective of whether it is Airbus and Boeing for C and D checks to foreign-based engineering stations.
According to Patel, the government will formally inform Indian Airlines in the next few days and IA will the be able to place formal orders. As per the roll out plan, the first of the 43 Airbus aircraft will be delivered in the second half of 2006 and thereafter one aircraft will be delivered each month. At current reckoning, the fleet acquisition plan of Indian Airlines coming after 15 years when it last acquired 31 A 320s will take be completed over the five to five and a half years.
Patel said the Union government has decided to give a sovereign guarantee and IA will also have no problem in tying up the funding for the plan. Meanwhile, IA's plan to lease five A 319s will begin shortly. The first A 319 will be inducted in November 2005, two more in December, and later one each in January and February 2006, respectively.