Maharaja's woes increase, no takers for lease plan

There seem to be no takers for leasing Boeing-777s from Air India, which plans to wet-lease six of them for up to two years owing to a demand-supply mismatch.

"Inquiries are coming but the rentals they are quoting are much less than our expectations," sources in the airline said here today. This has forced the airline to extend the date for submitting bids for the third time last week to January 29.

The ailing national carrier had invited requests for quote to lease out these wide-body Boeing 777s last November in its bid to mop up some additional funds amidst huge financial losses. The flag carrier is awaiting a government bail out now.

Of the six aircraft, which are 2007 manufactured, three are Boeing 777-200s (long range, LR) and remaining ones are Boeing 777-300s (extended range, ER).

"The airlines the world over have reduced capacity in the wake of huge losses and this has rendered a lot of aircraft becoming surplus. Consequently, the supply is much more than the demand, leading to a sharp decline in lease rentals globally," the sources pointed out.

"Currently, the lease rentals for a new Boeing 777-300 ER or Boeing 777-200 LR aircraft is $1.2 million per month in the global market," aircraft leasing agency Flying Machine managing director Sandeep Malkar said.

"In case of a wet-lease, it is around $6,400 per flying hour," he said.

Broadly in a dry-leasing arrangement, the lessee arranges and pays for the crew, fuel, and maintenance, while in wet-lease, the lessor airline provides the plane, its complete crew, pays for its maintenance and insurance to another airline which makes its payment by the number of hours operated.

Air India, which recorded a loss of Rs 5,548 crore (Rs 55.48 billion) in 2008-09 compared to Rs 2,226.16 crore (Rs 22.26 billion) in 2007-08, is focusing on cutting costs by Rs 1,500 crore (Rs 15 billion) and increasing revenues by Rs 1,200 crore (Rs 12 billion) as per its turnaround plan.

As part of this plan, the national carrier is phasing out its own leased aircraft besides putting its surplus aircraft on lease to cut cost and raise funds. The turnaround plan has been broadly divided into 0-9 months, 9-18 months and 18-36 months and has been segregated under operational efficiency, product improvement, organisation building and financial restructuring.