Air India is rationalizing fleet to reduce operational losses

Newsroom24x7 Staff

New Delhi: Five of the eight B-777 LR aircrafts purchased by Air India have been sold outright by the national carrier, presently overburdened by huge debt, to rationalize the fleet and reduce operational losses.

Out of the 23 B-787 aircrafts purchased earlier by Air India, 21 B-787 Dreamliner aircrafts have sold and acquired under the Sale and Lease Back Arrangement (SLB). The remaining 2 aircrafts have also been procured under Bridge Loans till their SLB financing is finalized.

The details of aircrafts procured and sold by Air India in the last ten years are as follows:

Sl.No. Type of Aircraft Purchased upto March, 2017 Sold outright Under Sale & Lease Back
a) A-320 04
b) A-321 20
c) A-319 19
d) B-777-LR 08 05
e) B-777-ER 12
f) B-787-8 23 21
  Total 86 05 21


As per the Turnaround Plan approved by the Government for Air India, these aircraft were to be procured by AI under SLB arrangement.

Impact of GST on Civil Aviation Sector

Under the GST regime the applicable tax rate on economy class passenger tickets has been reduced from 6% to 5% (non-creditable for goods), while the tax rate on business class has been increased from 9% to 12% with input tax creditable for both goods and services procured by airlines. Petroleum products including ATF are presently outside the purview of GST.

With a view to reducing the overall tax burden on the consumer, the Goods and Services Tax (GST) regime amalgamates a large number of Central and State taxes into a single tax and allows set-off of prior stage taxes thereby mitigating the ill-effects of cascading taxes on prices across all sectors including civil aviation.

Revenue Earned from Aviation Sector

The non-tax revenue receipts by way of Dividends, Guarantee Fee and Other Receipts booked to the Consolidated Fund of India (CFI) by the Ministry of Civil Aviation have grown at a compound annual growth rate (CAGR) of 87.8% between 2014-15 to 2016-17. The non-tax revenue receipts were Rs. 180.73 crore in 2014-15, Rs. 858.99 crore in 2015-16, and Rs. 1,203.54 crore in 2016-17. CAGR for the aviation sector in terms of total passenger traffic in India was 15.1% and that of air freight handled at Indian airports was 8.8%, as per data maintained by the Directorate General of Civil Aviation (DGCA) and Airports Authority of India (AAI), respectively.

Growth in Domestic Passenger Air Traffic Flow

In a written reply to a question in Rajya Sabha today the Minister of State for Civil Aviation Jayant Sinha gave the figures for the number of passengers carried by scheduled domestic airlines during the years 2014, 2015, 2016 & 2017 (up to June 2017) and growth with respect to corresponding previous period, which are as follows:

Year              Passengers Carried (In Lakhs)             % of Growth

2014                           673.82                                           –

2015                          810.91                                         20.35

2016                          998.88                                         23.18

2017                           561.55                                        18.03

(Up to June 2017)