Air India Unable to Pay for Spares; 2 Dreamliners Grounded

Air India
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Air India Ltd, the state-run carrier is trying hard to survive on a Rs 30,000 crore ($4.5 billion) bailout, which is actually funded by the country’s taxpayers. 

Air India received the bailout in 2012. It needs to meet cost, revenue and load-factor targets to keep getting funds from the government every year until 2021.

The Boeing Dreamliner fleet has been the cornerstone of Air India’s turnaround plan. Air India and some other airlines such as Norwegian Air built their dreams around the Dreamliner and its promise of more fuel-efficient operation. 

But, the Dreamliner, Boeing’s marquee jet, has experienced a series of malfunctions since its debut in 2011, including a 3-month grounding of the global fleet in 2013 after battery meltdowns on two planes.

Today, Air India is  still struggling to pay for its spare parts and maintenance. Two Dreamliners have been grounded. 

December 3, 2015.

After the planes were grounded, Minister of state for Civil Aviation, Mahesh Sharma, has stated in the parliament –
  • The aircrafts were not operational for about 10 months each as worldwide demand for parts outpaced supply from Boeing 
  • Air India failed to procure components on credit due to a “financial crunch”
  • One of the aircraft was grounded from April 2014 to February this year, while another has not been operational since January
  • The carrier kept paying rentals of $1 million every month for each of the two planes.
  • It also lost money as they were out of operation
  • Operators of the Dreamliner across the world are facing similar problems due to high rate of failures of components and Boeing could not support the demand of failed units on various 787 aircraft since demand was more than supply.

The grounded planes underline the woes of Air India. It has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. Its share in the local market has shrunk to 16 percent from 35% a decade back, placing it third in national ranking. Its financial credentials are very unimpressive today. As a result, Air India pays higher interest rates on its overseas loans compared with other Indian companies as lenders are not happy with the airline’s performance. It probably lost $900 million to $920 million in the year through March 2015, according to estimates by CAPA Centre for Aviation, after losing about $810 million in the previous 12 months. Lenders, too, have become very cautious after the infamous Kingfisher episode where the promoter ended up with a “willful defaulter’ tag. (See Mallaya 

Earlier, Air India did come up with some heartening news:

But, all its efforts appear to be not enough because money is still being spent as- 
  • $1 million every month for each of the two planes.
  • Non operation of 2 Dreamliners causes significant revenue loss
Besides, Air India has to bear with several other problems like exodus of its trained staff. Its Chief has to exhort its employees. (See Air India Chief had to exhort its employees and To stop poaching).

Compensation Wanted

Air India had said last year that it was trying to claim compensation from Boeing for delivering Dreamliners that didn’t meet its promised fuel-efficiency standards because the planes were heavier than planned. 

Earlier in 2014, Boeing said Air India was not happy with the reliability of the aircraft and Boeing was upgrading software and changing components on some of Air India’s planes whenever they could be taken out of service. 

Dinesh Keskar, a Boeing senior vice president based in Singapore, said there had been ”some issues” with Air India’s Dreamliners earlier this year but the problems mostly had been ironed out.

“We continue to work with Air India on the challenges of spare parts and all, but we feel that both reliability and availability of the aircraft has reached a good stage in the Air India operation right now,” he said. 

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