Air India exploring adding more planes

-- Air India sets up committee to look into adding more planes
-- Air India will add more planes only if convinced about profitability
-- Defers decision on taking delivery of three Boeing 777-300 jets
-- Air India replacing more business-class seats with economy class

NEW DELHI--Air India Ltd. is exploring the possibility of adding more planes, Chairman Rohit Nandan said Wednesday, even as the loss-making national carrier takes steps to cut costs and post a turnaround.

Mr. Nandan said Air India has set up a committee headed by him and that includes all its directors to consider the global aviation scenario and the future aircraft requirement for the company.

"The committee will look into the markets and whether we should move at the same pace or whether we should be conservative," Mr. Nandan said. "It's a very dynamic market. So, you will have to look at it every month and you will have to place any order at least one year in advance."

The committee will decide on any fresh aircraft orders only after it is convinced that the move would be profitable for the airline, he added.

The airline has deferred a decision on taking the delivery of three Boeing Co. BA -0.36% 777-300 Extended Range planes and is also reconfiguring some of its Airbus A320 planes by adding economy-class seats in line with lower demand for business-class seats, Mr. Nandan told Dow Jones Newswires. He didn't say why the airline has deferred the decision.

Air India is seeking to add new planes such as Boeing's fuel-efficient Dreamliner and taking measures like cutting staff through a voluntary retirement scheme as part of efforts to reduce expenditure and turnaround the company. It has posted losses for five straight years since 2007, when the government merged Air India and the erstwhile Indian Airlines to create the current entity.

The first of 27 Dreamliner jets Air India has ordered was unveiled to the Indian press Wednesday. Five more are scheduled to reach by the end of December and the rest in four years through 2016.

For Air India, one of the first customers for the airliner and the fifth airline globally to own a Dreamliner, the new planes are crucial as they will allow it to start flights to new foreign destinations and try and regain market share ceded to rivals such as Emirates Airline, Deutsche Lufthansa AG (DLAKY) and Singapore Airlines Ltd. (SINGY).

Although the Dreamliner will start flying to domestic destinations such as Kolkata and Chennai on Sept. 19, its overseas services on routes like Sydney, Melbourne, Paris and Japan will happen only in about two-three months, Mr. Nandan said.

The new jet is considered to be among the most fuel-efficient aircraft, with Boeing saying it uses 20% less fuel than similarly sized planes. The aircraft can carry up to 256 passengers and fly without stopping for up to 15,200 kilometers.

Air India plans to replace its older, fuel-guzzling aircraft with the Dreamliners. However, its plan to lease out five of its eight 777-200 long-range planes hasn't met with success due to their seating capacity.

"The number of seats in the 777-200 is about 246 but the cost of operations is the same as a 330-seat aircraft," Mr. Nandan said. "So, per-seat cost becomes very expensive. That's why we are trying to lease them out."

He said Air India can decide by 2015-2016 on taking the delivery of the three 777-300 extended-range planes.

Read more here: http://www.marketwatch.com