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Monday, Feb 27, 2006


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IA purchase pact: Need to streamline systems

Ashwini Phadnis

Four years, three Ministers of civil aviation and a market share that dipped from 39.8 per cent in 2003 to 31 per cent in 2005 is how long it took Indian Airlines (IA) to sign the purchase agreement for 43 Airbus A-320 aircraft. The pact was signed finally on February 20. The airline plans to induct the aircraft from this October and complete the process by 2010.

Ironically, the IA purchase pact was signed when several airlines from India, including some that have taken to the skies in the last few years, were announcing huge orders for aircraft and engines. These include at least two that took off just last year — SpiceJet and Kingfisher Airlines. While the low-cost airline, SpiceJet, announced purchase of 10 Boeing 737s, including five 737-900 Extended Range and five 737-800 aircraft, Kingfisher ordered for 15 ATR 72-500 aircraft.

Then, GoAir, which took to the skies earlier this year, announced its decision to acquire 20 Airbus A-320s, just as the to-be-launched low-cost outfit, Jagson Airline, decided to buy 20 Airbus A-321s.

Costly delay

But Indian Airlines, which started operations on August 1, 1953, could not make up its mind quickly. This raises the question as to why systems are not in place for the airline to put through vital transactions quickly, especially in a marketplace that is getting fiercely competitive.

The Government took several steps to ensure transparency before it gave the final nod for the IA purchase deal. This included a final round of price negotiations between an Empowered Group of Ministers (e-GoM), headed by the Finance Minister, Mr P. Chidambaram, and Airbus Industrie. But in an environment where even a day wasted is an opportunity lost, the need for having a system that allows a state-owned enterprise to function autonomously, yet be answerable to the people, is essential.

Happily, Indian Airlines was not idle for four years while the deal was being firmed up. It decided to look at leasing aircraft to meet the growing market demand. But, given the public sector nature of the airline, even this was not easy. Therefore, if the Government is serious about the future of the airline, it must ensure that the latter has the flexibility to take decisions promptly.

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