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May 8, 2001
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Money > Business Headlines > Report May 8, 2001 |
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Govt prunes IA's wings, refuses acquisition of new planesPuja Mehra Throwing the commercial interests of the national carriers out of the window, the ministry of civil aviation has decided against allowing the national carrier Indian Airlines to go ahead with its Rs 90 billion aircraft acquisition programme before its proposed privatisation. IA has instead been asked to lease aircraft to enhance capacity. Heavy investments by public sector enterprises always get embroiled in various controversies such as allegations about officials receiving kickbacks and so it's best to let the new management take the 'crucial' decision, top government officials told Business Standard. The ministry's refusal will cause the airline much concern since the five Boeing 737 aircraft it was to receive from the GIA leasing agent in December 2000 and April 2001 have not yet arrived. IA has already suffered losses to the tune of $4 million (approximately) due to the delay. GIA, according to market sources, had over-committed and the contract is likely to fall through. Though IA now plans to float fresh tenders for lease of 10 aircraft, the lease market is inflicted by a short supply of aircraft, suitable to the IA fleet. "With airlines offering cash down payments, IA does not have a chance," according to an official. "Allowing IA to buy new aircraft will mean numerous approvals from the finance ministry and the PIB (public investment board), even if IA finances the expansion by raising debt since the government will have to provide the guarantee to the lenders," a top-level civil aviation ministry official said while agreeing that the decision would hit the commercial interests of the airline severely since its aging fleet is in urgent need of new aircraft. IA had last week said it would raise debt in the market to purchase 35-40 new aircraft over a period of five years if its privatisation was not completed by May 31. "Our commercial interests do not allow us to delay our fleet expansion since IA privatisation is getting too stretched," IA executives had said. Powered by YOU MAY ALSO WANT TO READ:
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