Air India under acquisition enquiry

NATIONAL auditor Comptroller and Auditor General (CAG) has made an enquiry into the purchase of 111 aircraft made by the Indian government for carrier Air India.

Aside from the 40,000 crore (US$8.72 billion) deal CAG is scrutinising Air India’s turnaround plan and operational performance for the years 2002 to 2010.

The cost of each of the 43 Airbus A-320 family of aircraft and 68 Boeing aircraft first ordered by Air India in 2006 ranges from $37.34 million to $143 million.

The national auditor seeks explanation for the need for the large order through an elaborate business plan, and reasons behind Air India’s falling market share in spite of having such a large fleet.

CAG is also questioning why the maintenance, repair and overhaul (MRO) facility that was to appear as part of the Air India order has not come up. As part of the offset obligation for the airline’s 43-aircraft acquisition proposal, the European aircraft manufacturer was to set up an MRO.

In the Boeing deal CAG is said to not only have questioned why the number of aircraft ordered by the airline increased to 50 when the government was earlier planning to take 35 on firm orders and have the option of taking another 15 at a later date, but also sought to understand why a bridge loan was taken to finance the deal.

Under further scrutiny is the slow merger of former Indian Airlines and Air India. CAG is also understood to be looking into the handling of Air India’s routes and which of these the airline has withdrawn and why.