Cabinet Gives IA Go Ahead For Airbus Acquisition

ET&T Staff - Mumbai

The Cabinet Committee on Economic Affairs (CCEA) has cleared Indian Airline's (IA) proposal to acquire 43 aircraft from Airbus at an estimated price of Rs 9,890 crore. The airlines has secured the clearance after a long wait of almost four years. It plans to acquire 19 A319s, 20 A321s and four A320s. Almost 70 per cent of the aircraft that the airline will be acquiring will be for the replacement of the existing fleet, while the rest is slated for the anticipated growth in the market. According to sources the airline is likely to get the first of the aircraft by the middle of next year.

The CCEA, according to the Finance Minister, P Chidambaram, has approved the decision of the empowered Group of Ministers (e-GoM) to buy 43 Airbus aircraft for IA. The e-GOM, chaired by Chidambaram was set up by the Prime Minister as a last effort to negotiate a further reduction in the cost of acquisition from Airbus. The airline board in March 2002 had cleared the proposal to acquire the aircraft at a cost of Rs 10,089 crore.

However, the cost of the acquisition had escalated to Rs 10,237 crore. e-GoM was successful in getting a direct concession of Rs 349 crore from Airbus and also got Airbus and the engine manufacturer, CFM to increase the counter trade and offset commitment from the existing 30 per cent to 40 per cent. Airbus also agreed to set up not only an ultra-modern training centre for pilots with an investment of US$ 75 million but also a spare-parts warehouse in India to cater to the requirements of IA and other airlines.