Indian Airlines (IA) is unlikely to place orders for 50-seater aircraft until the government agrees to the proposal to either fund the acquisition or provide interest-free loans.
The IA management, which has picked HAL-Aero Transport Regional of France (ATR) combo over Bombardier for the Rs 450-crore worth deal, had in its last board meeting suggested that the government should consider meeting the entire capital cost of acquiring the aircraft or provide interest-free loans.
A study conducted by an airline panel concluded that the operation of the aircraft would result in a loss of around Rs 78 crore every year. For financial viability, fares will have to be increased by as much as 104 per cent on the 50-seater network or around 156 per cent on new routes.
The management is understood to have impressed upon the board that with the current depression in the market, such high fare increases will not result in achieveing a peak seat factor of 75 per cent.
The management in its presentation to the board stressed that the cash crunch faced by the airline does not allow it to purchase aircraft which would generate losses of Rs 78 crore per year.
It, however, made it clear that it was necessary to purchase the aircraft so that it could be deployed on north-eastern routes which would help in the socio-economic development of the region.
Hence, if the government wanted the airline to operate in these sectors, it should consider meeting the entire capital cost of purchasing the aircraft. This would enable the airline to peg the fare increase to merely 38 per cent on the existing routes and 56 per cent on the new routes.
The management also wanted the Government to provide the airline concessions in landing charges, aviation turbine fuel and sales tax for operating on these routes which have traditionally been highly uneconomical for all the airlines plying there.
The panel had shortlisted two aircraft types _ ATR-42-500 of Aero Transport Regional of France and Dash-8-300 manufactured by Bombardier of Canada _ for the 50-seater aircraft deal.
