Air India, India's national carrier, has recently invited bids for putting its recently acquired Boeing 787 aircrafts, commonly called Dreamliners. Till December 2012, Air India had received 6 Dreamliners and had issued RFP's inviting bids for sale and leaseback for 7 as it expects another Dreamliner aircraft in February. This decision has been approved by the government as part of the plan to turn around Air India's finances since sale and leaseback of the aircrafts allows the carrier to free up its capital tied up in the aircrafts. The national carrier has ordered approximately 27 Dreamliners aircrafts and intends to put all of these on sale and leaseback.
PSA View – Putting aircrafts on sale and leaseback is quite beneficial for Air India as not only will it free up the capital tied in the aircraft, it will also help the ailing carrier manage finances better by allowing tax deductions for a leased asset. However, with the recent grounding of all Dreamliner aircrafts all over the world following the directive of the US Federal Aviation Authority due to the fire risk caused by a battery problem, it remains to be seen how many bidders bid up to the expectation of Air India in order for the sale and leaseback to be successful. Be that as it may, it is a good move by Air India to adopt a common practice adopted by airlines across the world in order to reduce its financial stress.
Unviable routes to be auctioned
The Ministry of Civil Aviation has concluded a draft policy (expected to be announced by the end of this month), wherein commercially unviable routes will be offered to airlines by way of an auction. The sector includes eighty (80) tier-3 towns and cities of India. The winner or the lowest bidder will be the airlines, which seeks the least subsidy from the government to run services on the selected route. There will be only one winner on each route, who will have the exclusive rights to run the services for a period of two to three years. The draft policy is expected to be approved by the cabinet in the coming months.
PSA View – The proposed policy is a good attempt to encourage participation from airlines to provide services to commercially unattractive sectors. Monopoly to run services for an extended and specific duration on a certain route will be an incentive for airlines to ply on the, otherwise, economically unviable sectors.
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