Talks on new A-I fleet enter final stage

ON CLOUD NINE

Somiah committee completes three round of negotiations with Boeing.

The Oversight Pricing Review Committee, constituted to finalise the price of 68 new aircraft that Air India plans to buy from Boeing, has completed three rounds of talks with the US manufacturers and is expected to arrive at a decision soon.

The Rs 35,000 crore acquisition plan includes 50 new long range, wide bodied aircraft for Air-India and 18 B737-800W aircraft for Air India Charters Ltd.

The committee is headed by former comptroller and auditor general CG Somiah. "As part of the negotiations, Somiah committee had convened three rounds of meeting with Boeing and engine manufacturers and it is expected to finalise the price soon. The negotiation team is lobbying for a decent reduction of acquisition cost," industry sources said.

When contacted, S Venkat, Air-India Company Secretary, said the deliveries are likely to commence from the later part of 2006.

"Financial arrangements for the acquisition of these aircraft will be tied up to meet the pre-delivery commitments up to 15 per cent of the cost of the aircraft. A letter of intent will be delivered to Boeing and engine manufactures followed by the signing of the purchase agreement once the government approval is received," Venkat said.

Earlier, the Public investment Board (PIB) had recommended acquisition of total 68 aircraft on a not to exceed cost basis to the Cabinet Committee on Economic Affairs (CCEA) for approval, with a sovereign guarantee.

Air-India's internal committee, comprising of five directors representing finance, operations, planning, material management and engineering, had also completed several rounds of talks with Boeing under the guidance of Somiah Committee, they said.

"The talks with airframe and engine manufactures are happening simultaneously and they are in advanced stage. Now it should not take more time for finalisation and Air-India is expecting a better deal as the PIB clearance is the biggest one constituting one-third of the total value cleared by the board," they said.

Air-India is in talks with General Electric Company for engines for the proposed fleet and the negotiation for price is progressing, they added.

Air-India, which has a fleet of 42 aircraft at present, has been taking aircraft on dry lease to ensure that it gets a share of the fast growing market.

The public sector carrier has inducted 24 aircraft on dry lease as of date including three for its subsidiary, Air India Express.