Air India defends the sale of Boeing 777 planes to Etihad


Defending itself against the criticism of the Comptroller and Auditor General (CAG), Air India has defended the sale of five Boeing 777-200 LR planes to Etihad, saying it was the best option to check loss and reduce debt.

The CAG has criticised Air India for selling the aircraft below its indicative market price, under-reporting its losses and poor initiatives to monetise its real estate.

Air India inducted eight Boeing 777-200 Long Range aircraft in 2005 to serve the US with non-stop flights but the operations turned loss-making because the airline was unable to generate the expected loads and yields. In 2014 Air India sold five of the planes to Etihad for $336.5 million ($67.3 million per aircraft). While the CAG has rapped the airline for selling the aircraft at a loss, Air India has said the benchmark of the sale price was not available at the time of the transaction.

“There are very few operators of Boeing 777-200LR and no sale of aircraft had taken place in the secondary market. Thus, the benchmark of the sale price was not available. Even in the reports of valuers, it was apparent that the market price of $86-92 million per aircraft was indicative in nature,” said Air India’s Advisor (Finance) S Venkat.

Till date, Boeing has sold only 59 Boeing 777-200LR planes and globally these are flown by only 12 airlines. In contrast, 777-300ER variant has been successful and Boeing has sold over 800 units of the type.

 

Market demand and lease rates for the Boeing 200-LR aircraft have been declining with the induction of newer fuel efficient planes. Air India itself had to call for bids at least thrice with tenders attracting a single bidder on two occasions.

 

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Credit By : Business Standard.com

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