Bloomberg News

Air India Said to Consider Deferring Delivery of Boeing 787

June 08, 2011

(Updates with analyst’s comment in fifth paragraph)

June 8 (Bloomberg) -- Air India Ltd., due to be the second operator of Boeing Co.’s 787 Dreamliner, is considering asking the planemaker to defer deliveries of the aircraft because of a lack of cash, two people familiar with the airline’s plan said.

The state-owned carrier has ruled out canceling the entire order of 27 planes because the government may not approve, one of the people said. The people declined to be identified because they aren’t authorized to speak to the media. Air India is scheduled to get its first 787 in the fourth quarter.

Air India has slowed expansion after losing customers to Jet Airways (India) Ltd. and discount carrier IndiGo. The Mumbai-based flag carrier is losing 260 million rupees ($5.8 million) a day, compelling it to seek funds from the government as it tries to refinance bank loans.

Kamaljeet Rattan, a spokesman for Air India, said he wasn’t aware of any plan to defer deliveries of the 787. Dinesh Keskar, the head of Boeing’s India commercial-aircraft business, wasn’t available when called on his cellphone. Miles Kotay, a spokesman for the Chicago-based planemaker, didn’t reply to an e-mail sent on June 2.

“Boeing won’t have a problem reallocating these aircraft to other airlines,” said Binit Somaia, director of Centre for Asia Pacific Aviation in Sydney. “The 787 is so late that so many airlines are screaming to get hold of it.”

$840 Million

Air India ordered the Dreamliners in 2005 as part of a plan to buy 68 passenger jets worth about $8.1 billion. Boeing and Air India are in discussions regarding the airline’s demand for $840 million in compensation because of previous delays caused by Boeing, Rattan said.

Delivery of the planes was originally supposed to start in September, 2008. The first seven Dreamliners are due for delivery to Air India by March 2012, one of the people said.

Boeing has pledged to deliver as many as 20 Dreamliners this year after the first handover was delayed seven times by use of new materials, engine-supply disruptions and other problems. The manufacturer had orders for 835 of the jets as of last month, according to its website. The two models on offer have an average price of $201.7 million.

Air India has asked the Indian government for 175 billion rupees to help reduce its debt of 400 billion rupees as of March, according to Rattan. The carrier posted a loss of 55.5 billion rupees in the 12 months ended in March 2010, its fourth unprofitable year.

Boeing will deliver the first 787 plane to initial customer All Nippon Airways Co. in August or September.

For Related New and Information: News on the company: AIND IN <Equity> CN <GO> Dreamliner stories: STNI DREAMLINER <GO> India’s aviation industry news: TNI INDIA AIR <GO> Top India stories: TOP IN <GO> Top Transportation stories today: TRNT <GO> Boeing capital structure: BA US <Equity> CAST <GO>

--Editors: Vipin V. Nair. Nicholas Wadhams

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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