Airbus sweetens IA deal

The government today cleared Indian Airlines' plan to acquire 43 aircraft from Airbus Industrie after extracting a discount of Rs 349 crore, reducing the total price to Rs 9,890 crore.

This is the second discount that the European aircraft manufacturer has agreed to following a Rs 290 crore reduction during the initial round of negotiations in March this year. The negotiations had started at Rs 10,237 crore.

The deal was worked out in a series of meeting between the empowered group of ministers (EGoM), headed by P Chidambaram, and Airbus Industrie's top executives, including its Global Marketing Vice-President Kiran Rao.

The price that IA will now fork out is about Rs 4,500 crore ($1 billion) lower than the list price of Rs 14,260 crore ($3.1 billion) for the 43 Airbus aircraft of various combinations.

"This is the best deal we can get. We have been able to get a substantial saving on the price of Rs 10,237 crore and in the terms and conditions initially offered to Indian Airlines," Civil Aviation Minister Praful Patel said here today.

As a part of the deal, Airbus and CFM, the aircraft engine maker, will source business worth 40 per cent of total deal from India. This could come in the form of components, software programmes or services.

"The 40 per cent counter trade agreement is higher than the initial agreement of 30 per cent," Patel said.

The first aircraft will join the fleet in the second half of next year and the remaining 42 thereafter "� one plane every month.

Indian Airlines will by buy 43 aircraft -- including 19 Airbus A 319, 20 Airbus A 321 and four Airbus A 320 aircraft.

'We look forward to being Indian Airlines' continuing partner as it stimulates and grows the extremely important Indian market,' Airbus said in a statement.

Airbus has also agreed, as a part of the deal, to establish an ultra-modern training centre for pilots to fly the Airbus family of aircraft at a cost of about $75 million and an MRO (maintenance, repair and overhaul) facility for these aircraft at a cost of $100 million in India.

'Airbus Industrie also informed us in writing the establishment of spare part warehouses in India, not only for Indian Airlines but also for other carriers in India,' Patel pointed out. 'These concessions bring in lot of additional investments and facilities by the aircraft and engine manufacturers.'