Says the airline’s management wasted Rs502 crore on engine overhaul facility, leading to grounding of aircraft and loss of business
Naveeta Singh
While Air India (AI) has been crying hoarse about shelling out Rs800 crore monthly for payment of salaries to 1,600 pilots, a comptroller and auditor general’s (CAG) report slams the airline’s management for wasting Rs501.93 crore on engine overhaul facility. This had led to grounding of aircaft and loss of business.
The report also reveals how the airline incurred wasteful expenditure which could have been curtailed.
According to the report for 2010-2011, the Jet Engine Overhaul Capacity (JEOC) of AI, erstwhile Indian, was underutilised.
The report states: “It was observed that the capacity utilisation of the shop was low during the period 2004-05 to 2008-09 and the shop could overhaul only 179 engines of 210 engines removed. Due to lower production of engines, the company was unable to carry out its operation at optimum level and aircraft ranging from one to 11 were on ground for 1,370 days during the period of review. Thus, due to failure of the shop to provide serviceable engines for business operations, the company lost the potential revenue of approximately Rs291 crore.”
It adds that the company incurred Rs10.92 crore towards excess labour cost on account of inefficiency of the shop.
The reasons for excess time taken were also not on record. Between October 2005 and December 2006, around 18 engines were lying at the JEOC and the airline had to take four engines on lease to keep their aircraft flying. “The company incurred an extra expenditure of Rs34.68 crore on account of lease charges paid on four leased engines besides an expenditure of Rs0.28 crore on transportation thereof,” reads the report.
The JEOC was set up in May 2005 to outsource the repair of engines. It was to send 23 engines (V2500) to foreign private agencies for repairs in order to overcome the situation of non-availability of serviceable engines. “Consequently, the company had to incur expenditure of Rs446.24 crore on overhaul of these engines. Out of this, an expenditure of Rs40.20 crore on labour, transportation, mark up on material and testing charges was avoidable had the company repaired these engines in-house,” the report states.
The company incurred an expenditure of Rs84.11 crore on outside repair of piece parts during 2006-09.
“The company got repaired 23 engines during 2004-09 from outside parties by incurring an expenditure of Rs414.39 crore which included an extra expenditure of Rs38.21 crore on account of labour, mark-up on material, transportation and testing charges.”
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