Air India returns 6 leased aircraft to reduce costs

In a bid to cut cost and trim its fleet, Air India has returned six aircraft, including a Boeing 777, in the last two months. The move will come as a big relief for the cash-strapped airline.

Airline sources said the management was working on a strategy to return all leased aircraft and may defer new aircraft deliveries.

The airline has 155 aircraft. Of the six returned, three are Boeing 777s (ER and LR) and three are Boeing 737-800s. The aircraft were returned to the Ireland-based aviation firm last month. “The aircraft were on international sectors but their return will have no impact on operations,” an airline official said.

Sources said the airline may go in for phased cancellation and deferment of new aircraft to tide over massive losses. A plan, to defer over a dozen new Boeing aircraft, will save over Rs7,000 crore. The airline had placed orders for 111 aircraft — 68 from Boeing and 43 from Airbus — valued at Rs50,000 crore.

The airline had suffered massive losses because of fleet expansion. Its external borrowing reached sky high in the last three years.

The airline had sought a soft loan of Rs3,000 crore, besides equity infusion, from the government. Sources said external borrowings rose steeply from Rs6,550 crore in November 2007 to Rs15,241 crore in June 2009. External borrowing from banks is shooting up to over Rs8 crore every day.

“This has been largely due to servicing of debts on account of purchase of aircraft, as also operating losses, compounded due to the economic recession and high oil prices last year,” a senior airline official said.