The Hindu : Boeing willing to improve offer to IA

Online edition of India's National Newspaper
Wednesday, Oct 15, 2003

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National

Boeing willing to improve offer to IA

By Vinay Kumar

NEW DELHI OCT. 14. Indian Airlines' mega aircraft purchase plan has taken an interesting turn with one of the contenders, Boeing, making it known that it is prepared to improve its offer. However, the IA Board has already cleared a proposal from Airbus Industrie and any attempt to negotiate with Boeing would run counter to the existing guidelines of the Central Vigilance Commission of talking to the lowest bidder.

Boeing has extended the validity of its proposal till December 31, 2003, and said it was prepared to make "substantial improvements". Though the IA Board has approved the proposal to acquire 43 new aircraft from Airbus Industrie at a cost of Rs. 10,000 crores, the final word on the deal would come from the Government, which has to take into account "geo-political considerations".

Both Airbus and Boeing are keen to clinch the mega-deal as the global aviation industry has been passing through bad times since September 11. It has also been buffeted by the SARS epidemic and the Iraq war. With the Vajpayee Government going into the election mode for the coming Assembly polls in five States, there appears to be no hurry to either convene a Public Investment Board meet to clear the IA proposal or push Air India to make its requirements for new aircraft known.

Interestingly, the BJP-led coalition Government has just cleared two mega deals in the defence sector — Israeli Phalcon radars for Rs. 4,700 crores and British Hawk advanced jet trainers at Rs. 8,000 crores.

Boeing, in its latest September 30, 2003 letter to IA, said: "The combined effect of a reduction in acquisition costs and incorporation of advance technology winglets on a 43 aircraft strong IA 737 New Generation fleet, can result in savings estimated at $250 million (about Rs. 1,000 crores). Boeing recently provided such pricing to Air India for 737-800 aircraft. The pricing to Air India is considerably less than Boeing's current offer to Indian Airlines".

It also made a reference to the "advanced technology blended winglets" which were available as an option on the 737-700/800 aircraft. "These visually distinctive winglets lower, drag and improve aerodynamic efficiency, thus reducing fuel burn," Boeing said in a letter, the copy of which was accessed by The Hindu.

The fleet acquisition plan for both the national carriers — IA and Air India — has been pending for a long time. In the case of IA, it will mean replacement of 70 per cent of its fleet. The new aircraft will replace the ageing fleet of Airbus A-300 and Boeing 737-200 in a phased manner. IA operates a total of 60 aircraft. According to the IA's March 2002 proposal, now awaiting the clearance of the Public Investment Board, Airbus A-319, A-320 and A-321 from Airbus Industrie are to be inducted during 2003-04 to 2007-08. The proposed aircraft are to be fitted with CFM-56 engines. Government sources said that no firm target date for completion of the acquisition process could be indicated at this stage, since the procedures of PIB would have to be followed.

Air India, too, has plans to acquire new aircraft in order to phase out older ones, rationalise its fleet and expand capacity. The expert technical committee of Air India is still evaluating the aircraft which would suit its needs. In the reckoning are Airbus A-340 and Boeing-777. India's international carrier has changed its requirement from 17 long-range aircraft on firm basis to 10 firm and seven optional. To meet short-term needs, it has taken nine A-310 aircraft and one Boeing 747-400 on dry lease. Plans are afoot to lease four more jumbos, probably from Korean Air, despite Air India earlier claiming that it was difficult to fill up all the seats in a B-747-400.

Global aviation experts have told the Government that there is a surplus of aircraft available for leasing. Reduction in travel has led to "over 2,000 aircraft being parked in storage, out of which about 600 are less than 10 years old,'' the U.S.-based International Society of Transport Aircraft Trading president, Michael A. Metcalf, wrote to the Economic Adviser to the Prime Minister, S. Narayan, as recently as September 24. He quoted industry data to point out that there was a reduction of 20 per cent or more in the monthly lease cost for a relatively new — about two to three years old — single aisle aircraft such as the A-320 or the one from B-737 family.

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