Sunday, September 15, 2013

Air India meets leasing companies to rework terms and conditions

MUMBAI: Air India on Friday met aircraft leasing companies to rework terms and conditions before it floats a tender to lease Airbus A320 planes for the second time, a senior executive said.

The meeting was called after the carrier failed to get sufficient response to its tender for leasing 19 of the planes even after extending the bidding deadline.

The executive didn't share details of what might be discussed, but the carrier may have to increase lease rentals than it had earlier planned to or lease them for a longer tenure.

Air India plans to lease brand new planes to replace older ones of the A320 family in its fleet, a move that will help it reduce maintenance costs and operate more fuel-efficient flights.

The carrier plans to expand its all-economy flights on these planes to expand its market share in the domestic market currently dominated by low-cost airlines such as IndiGo and SpiceJetBSE 0.46 %.

Higher lease rentals will further hurt the bottom line of the loss making airline and hamper its plan to get into the profit zone.

Like others in the industry, the carrier's existing rental charges, usually paid in dollars, have already shot up due to depreciation of the rupee against the dollar. The rupee has fallen almost 20% this year against the dollar on concerns of the country's widening current account deficit.

Apart from lease rentals, airlines pay a part of their salary bill as well as interest on loans on planes in dollars.