The Comptroller and Auditor General of India (CAG) has pulled up national carrier Air India for the inordinate delay in the process of leasing narrow body planes for replacing its vintage A320 aircraft.
The inordinate delay defeated the objective of reducing maintenance costs by way of inducting new planes in their place, according to the CAG report tabled in Parliament today.
The Company took more than three years (May 2010-August 2013)) to float the global tender after recommendation of the consultant and five years to induct the aircraft.
Global network consultant SH&E had in May 2010 observed that the 1989-1994 vintage Airbus A-320 planes with V2500-A1 engines were "uneconomical" and needed to be phased out "urgently" as maintenance cost of these aircraft was USD four million per year per aircraft.
"The SH&E recommended immediate leasing of 10 A-320s or B-737s to replace these classic aircraft. During July 2010, the Board considered and approved the recommendation of the network consultant for dry leasing of 10 new A-320 aircraft in March 2010," the report said.
As per the report, the Air India Board was apprised that turnaround plan (TAP) envisaged aggressive fleet induction.
"However, the same would involve incremental lease charge which was risky keeping in view the financial position of Air India. Therefore, pending government approval for financial Restructuring Plan and financial constraints of Air India, aircraft induction had not progressed," it noted.
In May, 2013, the Board approved the fleet renewal plan, envisaging leasing of 19 A320 units as replacement capacity to maintain network and authorised management to issue Request for Proposal for the same.
According to CAG, China Aircraft Leasing Company (CALC) was the sole qualified bidder, which submitted its bids through e-mail which was in contravention of the general terms and conditions of tender.
"However, CALC was given a chance to furnish bids as per tender requirements and tender closing dates were extended twice. Audit noticed that two of the other shortlisted bidders (Bank of China and AWAS, Singapore) had withdrawn their bids," it said.
Air India executed a lease agreement with CALC for inducting five A-320 aircraft in June 2014.
The company has also signed a lease agreement for 14 A-320 aircraft in March 2016 delivery of which has already commenced from last month.
"Though the consultant pointed out urgent need for the aircraft, Air India could induct only five aircraft till March 2016, (after a delay of five years)," the CAG said.
Air India in its reply informed the CAG that "though concerted efforts were made to replace the old classic fleet, no suitable aircraft was available in the market for which the deal could be concluded. Therefore, the airline concluded the deal in two parts with CALC and ALAFCO (of Kuwait).
Disclaimer: No Business Standard Journalist was involved in creation of this content
