The decision to review Air Indias internal committee report on medium capacity long range (MCLR) aircraft acquisition was taken because of the reservations expressed by some board members who raised doubts about the methodology used to evaluate the bids.
According to airline sources, the report was circulated among the members of the joint board of Air India and Indian Airlines for comments. But even before the report was officially tabled, certain board members raised doubts about some of the key parameters used in the report including the spillover factor, seat count and cabin layout.
Air India plans to add 23 MCLR aircraft to replace its ageing B747-200 fleet of nine aircraft. The cost of the new aircraft will be around $3 billion.
The members pointed out that the report was flawed due to inaccurate use of data to determine the spillover factor. The spillover factor is a measure of the number of flights in a given a time period that are full and as a result turns away passengers. The spillover factor determines the additional revenue generated by Boeing B-777 and McDonnell Douglas MD-11 over Airbus A-340.
They stated that even the data used to evaluate the bids was based on 1990 traffic flows. Moreover, the data was plotted incorrectly resulting in a high spillover factor. As per the report, the spillover factor of 48.2 per cent gives Boeing a crucial lead over its rivals.
However, a lesser spillover factor and other parameters would have significantly altered the outcome of the report. If the graph is plotted properly, the spillover factor would have come down to 42 per cent, the members claimed.
To determine the spillover factor, the internal committee used data from five aircraft of Air India. These were AI-151; 143; 159; 141 and 145. As per the committees findings, Boeing 777 was found to be a better revenue earner while A-340 was found to have a definite cost advantage than the rest. The total operating cost for A-340 over a period of 17 years for 23 aircraft was Rs 53,646 crore, for B-777 between Rs 55,048 crore to Rs 55,500 crore with different engines and for MD-11, Rs 54,934 crore.
