Air India's aircraft cancellations, deferrals to cost big

Air India, the national carrier and the country's largest by fleet size, may have to pay a penalty of Rs125 crore to Boeing and Airbus for deferring or cancelling earlier orders for buying aircraft from the two manufacturers, according to a report.

A total of 70 aircraft from Boeing and Airbus will be deferred and a few orders will be cancelled, the Econmic Times quoted two people close to the development as saying.

Air India will also stand to lose another Rs15-20 crore additionally as interest because National Aviation Co of India Ltd, the holding company for the carrier, had made pre-delivery payments to Airbus and Boeing. All these aircraft were supposed to be added to Air India's fleet by 2011 and now will be deferred till 2015, the report said.

Meanwhile, all eyes are on the comprehensive restructuring plan that Air India is expected to present on 25 July to a committee of secretaries headed by cabinet secretary K Chandrashekhar.

Reeling under mounting loans, dwindling revenues from a falling market share, and other operational problems, Air India was asked to prepare a restructuring plan in order to qualify for government financial intervention.

The committee headed by KM Chandrasekhar includes finance secretary Ashok Chawla, civil aviation secretary Madhavan Nambiar and principal secretary to the prime minister T K A Nair.