Airline Code [IAC]
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Indian Airlines (IA) received (07-Sep-05) Indian Government approval to acquire 43 Airbus aircraft for USD2.2 billion, as part of its fleet acquisition plan.
The price, reportedly 29% less than the original quote of USD32 million, was confirmed after the Empowered Group of Ministers (EGoM) concluded (06-Sep-05) the final round of negotiations with Airbus. The acquisition proposal had been approved by the IA board in Mar-02 and the Public Investment Board in Nov-04, but was referred to eGoM to consider the acquisition price after claims that the carrier was being charged more than a similar deal to an airline in Southeast Asia. EGoM was headed by the Finance Minister, P Chidambaram, and included the Minister for Law, H R Bhardwa, the Minister for Programme Implementation, Oscar Fernandes, and Minister for Civil Aviation, Praful Patel.
The acquisition will reportedly reduce operational costs by 10%, reduce maintenance costs and substantially improve the profitability of the carrier. The addition to the fleet will also help accommodate a projected annual passenger traffic growth rate of 15%. The acquisition is expected to be 90% funded through external commercial loans, with the IA Board also approving a proposal to raise funds through an IPO.
The Central Government has also reportedly committed to a INR3.3 billion additional equity infusion for the airline. The 43 aircraft include 20 A321s, 19 A319s and four A320s, with the first aircraft scheduled for delivery from Sep-06, followed by one aircraft each month. As part of the new deal, Airbus has also reportedly agreed to:
- Increase counter trade offer from 30% to 40%;
- Invest USD75 million to establish a new pilot training facility in India;
- Invest USD100 million to establish an MRO facility in cooperation with a private consortium;
- Establish a spare parts warehousing facility to cater to Airbus aircraft operating in India.
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Indian Airlines to proceed with fleet acquisition plan 
