A-I's fleet acquisition plan gets investment board nod

The Public Investment Board (PIB) today cleared the plan to buy 68 aircraft for Air India and its low-cost subsidiary Air India Express.

It will also ask the government to provide the state-run carrier a sovereign guarantee to raise funds to finance the fleet-expansion plan.

This clears the first hurdle in the path of the Maharaja buying airplanes to boost its ageing fleet.

The size of the fleet acquisition plan is estimated at $6 billion. The negotiations with the Boeing Company will take place on the basis that the deal must not exceed the value cleared by the PIB. This is one of the largest-ever deal cleared by the PIB for any PSU.

"The negotiations with Boeing are currently underway by the price-negotiations committee appointed by the Air India management. The proposal will now be sent to the Cabinet," said Civil Aviation Secretary Ajay Prasad after the three-hour PIB meeting.

The Air India board had approved the proposal earlier this year. The PIB is expected to recommend to the Cabinet to provide support to the carrier to raise funds in the country as well as overseas.

About 90 per cent of the required funds will be raised from external corporate bodies, while the balance is expected to come as government assistance.

Ministry sources said the actual deliveries of aircraft would be made in the next 3-4 years. Till then, the public sector carrier would continue to lease planes to augment the fleet to add capacity.

The government is likely to appoint a committee to oversee the price negotiations. It is likely to follow the same model that it had adopted in the case of Indian Airlines.

It is also likely to appoint a group of ministers to conduct the final round of negotiations with the aircraft maker to get the best price possible.