Ailing airline: Aviation minister Vayalar Ravi supports the purchase
INDIA’S government has hit back at claims that state-run carrier Air India botched a multi-billion-dollar aircraft purchase which the national financial watchdog said could put the firm’s future at risk.
The Comptroller and Auditor General (CAG) yesterday said in a report that the “risky” acquisition of 111 new Boeing and Airbus jets was mistimed and imposed “an undue long-term financial burden on the carrier”.
The 68 Boeing and 43 Airbus aircraft are costing around $10bn (£6.27bn).
The CAG said the entire acquisition, to be funded through debt, “was a recipe for disaster” and it should have raised alarm bells for the ministry and India’s top government policy think-tank, the Planning Commission.
Assumptions that the new planes would lead to an increase in Air India’s market share were “unduly optimistic” and “not validated,” it added.
But Civil Aviation Minister Vayalar Ravi said yesterday that it was a collective decision by government and Air India management to buy the aircraft and was designed to strengthen the ailing airline.
His predecessor, Praful Patel, who oversaw the acquisitions, added that the move was essential to keep the national flag-carrier afloat, amid increasing competition for passengers from private airlines.
“Air India was functioning with planes that were 20 years old,” Patel was quoted as saying by the Times of India newspaper today.
“If we wanted to do well we needed new aircraft but were also aware that the company’s financial situation would not have permitted it.
“It was a Catch-22 situation.”
Air India has been in the red since 2007, when it merged with domestic carrier Indian Airlines, and has seen its share of passenger traffic fall due to competition from private domestic companies.
Mounting debts have left it struggling to pay staff, as it awaits a further government cash injection and a turnaround plan.
Air India declined to comment on the CAG report, with a spokesman describing it as “an observation from one government agency on another”.
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