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Indian airlines swoop on depressed plane market

Security forces thought it could be September 11 all over again.

When radio contact was suddenly lost last Saturday with an Alliance Air Boeing 737 headed for New Delhi from Jabalpur, Indian authorities quickly prepared for the worst.

They had to. Just three days earlier five gunmen stormed the nation's parliament, killing 14. In October, 38 people were killed when Muslim gunmen attacked the Kashmir state assembly.

Now, watching the approach on radar of a plane with 56 people aboard, Indian authorities declared a security alert. Maybe the aircraft had been hijacked by gunmen hell-bent on crashing it into the Parliament, the presidential palace or some other landmark.

Fortunately, it was a false alarm. A problem with the radio equipment aboard the 20-year-old aircraft, which had just undergone a major maintenance check, was to blame.

The scare, though, added to September 11-induced momentum within the government to allow state-owned Indian Airlines, the parent of Alliance Air, to finally take long-stalled action to renew its rickety fleet.

Following its failure to sell off major stakes in Indian Airlines and long-haul carrier Air-India earlier this year, the government is moving to take advantage of the post-September 11 slump in the aviation market by shopping for great deals on aircraft.

"In today's market you'll get better deliver times and better prices," says Dr Suvendoo Ray, president of Boeing India, speaking of the new plane market. "This is the perfect time."

Indian carriers are among the few airlines worldwide now in the market to buy or lease aircraft, led by the state-run airlines looking to upgrade their fleets to improve their appeal to potential buyers and strategic partners.

INDIAN AIRLINES

Early this month, the government gave the go-ahead for Indian Airlines, the nation's largest domestic carrier, to begin the process of acquiring 38 to 40 aircraft over the next five years at an estimated cost of Rs 90 billion.

As a start, Indian Airlines has asked Boeing, Airbus SAS and jet engine makers General Electric Co, International Aero Engines and Rolls-Royce Plc to resubmit bids by Friday for 18 aircraft.

Those planes will replace 11 Boeing 737-200s which are 15-18 years old, an Indian Airlines spokesman said. The airline, which operates a fleet of 55 aircraft, last bought planes in 1986.

The board of Air-India at a meeting last Wednesday also approved a fleet expansion and renewal plan, and the government is expected to soon announce a new business plan for the national flag carrier.

The airline, which has lost money for the past seven years, previously owned all the aircraft it flew. But in the past year it began leasing aircraft as it moved to replace three 19-year-old Airbus 300s.

It is paying $270,000 a month for each of four leased aircraft added to its fleet over the first half of 2001, but expects to pay less for another plane due next month and any subsequent additions, spokesman Jitender Bhargava said.

"You have more capacity in the market than demand so the rates are soft," Bhargava said.

India's second-largest domestic airline, Jet Airways, also may ask Boeing to renegotiate terms of planes it has on order, executive director Saroj Datta said.

And Tiny Air Sahara plans to lease three Boeing 737s to add to its current fleet of six aircraft, spokeswoman Neeta Raina said.

"From an average lease rate of $250,000 per month, we have been able to cut...the cost to $200,000," Air Sahara Chief Executive Officer Uttam Kumar was recently quoted as saying by The Times of India daily.

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