Air India plans to induct 30 Airbus A320 aircraft

National carrier Air India is planning to induct 30 Airbus A320 aircraft, due to a robust growth in domestic air traffic, taking its total fleet size to around 150 planes in the next three financial years.

“We want to capitalist on the domestic market which has witnessed a double-digit growth throughout this year. The yields in the domestic market are much higher for us,” said a senior AI official.

A substantial decline in jet fuel prices, which constitutes around 40 per cent of the total operational cost of an airline, allowed the domestic airlines to offer tickets at lower prices attracting air traffic.

It has also helped the Indian carriers in improving its balance sheet with both SpiceJet and Jet Airways zooming back to profit in the past quarters this year. Fares this year were 15-20 per cent lower than the previous year. Air India will induct up to 15 A320 aircraft on dry lease, without ground staff, insurance and supporting equipment. Deliveries are expected between April-December next year.

The aircraft will be on lease for a period of up to 12 years and will include both new and old planes, which are not older than six years at the time of leasing. Moreover, Air India plans to induct 15 more A320 and a request for proposal in this regard will be floated soon, the official added. In addition to these 30 A320 aircraft, Air India has already announced inducting new fuel-efficient 14 A320 neos (new engine option) to replace its older fleet. The delivery of these aircraft is expected to be between April 2017 and March 2019.

The airline will fly these aircraft on domestic routes. Air India is expected to record marginal operational profit, after 10 years, in January-March quarter of 2015-16.

As a part of its restructuring, the government has been continuously infusing capital into the loss-making airline since 2010-11. It has already pumped in Rs.22,000 crore out of the planned Rs.30,231 crore. Official data showed that the domestic airlines carried 8.12 crore passengers in 2015 compared to 6.74 crore passengers in the previous year, posting a robust growth of 20.34 per cent. In 2014, the domestic air traffic grew by 9.70 per cent.

However, in 2015, the domestic traffic share of AI dipped to 16.4 per cent from 18.4 per cent last year. Low-cost carrier IndiGo gained the most with a jump from a 31.8 per cent market shares in 2014 to 36.7 per cent in 2015. The market share of Jet Airways also went up slightly from 21.7 per cent in 2014 to 22.5 per cent in 2015.

According to its website, Air India has 118 aircraft in its fleet at present with 66 Airbus planes and 41 from Boeing. It plans to induct six Boeing 787 aircraft beginning November and the delivery of the pending three Boeing 777-300 ER aircraft is expected between January-March 2018, the official added.

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Air India changes stand on 5/20 rule to allow private airlines to fly abroad

National carrier Air India, marking a major shift in its stance, has dropped its resistance to abolish five years and 20 aircraft norms, also known as 5/20 rule, for Indian carriers to be able to fly abroad.

Air India, which is struggling to return to profitability has conveyed to the government in a recent meeting that it will not oppose the ‘5/20 rule’ if it is abolished, a senior AI official said.

“We have not opposed the abolition of 5/20 rule. We have told the government we will support it in its policy decisions if it’s in the national interest,” said the official.

According to the ‘5/20 rule’, all airlines in India are permitted to fly abroad only if it has five years of domestic flying experience and at least 20 aircraft in its fleet.

The Union government has drafted a ‘civil aviation policy,’ that is yet to go to the Cabinet for its approval, in which it is evaluating abolishing the ‘5/20 rule’.

The industry is divided over the issue of ‘5/20 rule’. The private airlines which are allowed to fly abroad — IndiGo, Jet Airways, SpiceJet — have all opposed the proposal to abolish the rule as it will impact their market.

However, the new airlines — Vistara and AirAsia India — are in favour of scrapping the decade-old rule which is restricting them to fly to international airports from India.

This tug of war between the old and the new airlines has put pressure on the Union government to do away with the rule.

In fact, the draft civil aviation policy has been delayed mainly due to the government’s unclear stand over the ‘5/20 rule.’ The government is evaluating three options — keeping the rule, completely doing away with it or replacing it with a credit-based system.

The shift in stand by AI will give more room to the government to abolish the rule thereby helping Vistara and AirAsia India to fly abroad.

The present AI management, under its new Chairman and Managing Director Ahwani Lohani, is believed to have told the government in a recent meeting that the 5/20 rule is an “external factor” which will not have much impact over the airline’s performance.

“The management is more focussed on addressing the minor internal issues that have affected the airline’s performance in the past. We have conveyed to the government that their decision to keep the 5/20 rule or abolish it will have no impact on us,” said a senior AI official.

Apart from AI officials, the meeting, held on December 30, was attended by the Chief Executives of Vistara and AirAsia India.

All the previous AI managements had expressed strong reservations over the idea to ease the 5/20 rule. The previous management had said “the sudden withdrawal of the protection of 5/20 rule, might be the proverbial last nail in the national carrier's coffin without bringing any significant benefit to the nation.”

The ‘5/20 rule’ was approved by the Union Cabinet in December 2004 when many decisions were taken to protect national carrier Air India. At that time, along with Air India, Indian Airlines, Jet Airways and defunct airline Air Sahara were allowed to fly on international routes.

IndiGo, launched in 2006, had to wait till 2011 to begin operating on international routes and SpiceJet, which began operations in 2005, had to wait till 2010 to do so.

In 2004, the government had taken many policy decisions to protect Air India. “To allow growth of its network, it is decided that Government may reserve traffic rights for Air India in accordance with its operational plans for the next two years. A calibrated approach may be adopted so that the national carriers get time to adjust to the new competitive environment,” the Union government had said.

Back then, the operation of flights to the Gulf countries of UAE, Qatar, Oman, Bahrain and Kuwait and Saudi Arabia was kept reserved for Air India and Indian Airlines for the next three years “as most of their operational revenue and profits on international routes accrue from these routes.”

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