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Air India shuts down bleeding cargo business

Cash-strapped carrier Air India has put up its entire fleet of six Boeing 737-200 freighters for sale. The move aimed at cutting losses and raising more revenue comes ahead of the meeting of the Group of Ministers to finalise the infusion of an additional Rs 6,600 crore to revive the government-owned airline.

Sanjay Singh   New Delhi     Last Updated: January 7, 2012  | 08:29 IST

Cash-strapped carrier Air India is winding up its loss-making cargo business and has put up its entire fleet of six Boeing 737-200 freighters for sale. The move aimed at cutting losses and raising more revenue comes ahead of the meeting of the Group of Ministers (GoM) to finalise the infusion of an additional Rs 6,600 crore to revive the government-owned airline.

The government will review the steps being taken by the ailing national carrier to enhance revenues and check its mounting debt before approving the bailout package.

The six 30-year old Boeing 737-200 freighters put up for sale belong to the erstwhile Indian Airlines. In 2007, AI had converted Boeing 737-200 into cargo carriers when it had planned to launch its cargo hub using Nagpur as the base.

However, the plans were later shelved due to the financial crisis and there was a similar move to sell off these planes in 2010. The carrier had earlier sold off four Airbus A-310 freighters.

Apart from the six freighters, Air India also plans to dispose of eight aircraft engines, four auxiliary power units, aircraft seats and spares to raise money.

"The cargo aircraft are too big for domestic operations and too small for international operations. More than the deteriorating economic scenario which has hurt Air India's cargo business it is the lack of a critical distribution network, warehousing facilities, mismanagement and inadequate infrastructure that has driven away business from Air India's cargo division," explained a top airline official.

While small and well managed operators like Blue Dart have been successfully running their air cargo business with a handful of aircraft, national carrier Air India's cargo operations and Captain G.R. Gopinath's Deccan 360 have been making losses.

In addition, competing with cash-rich airlines like Emirates proved to be an uphill task. Three of these six planes put on sale were earlier operating postal charters for India Post. This would not only put on hold India Posts' expansion plans but will also compromise the government's goal of financial inclusion, especially in rural areas.

The government plans to tap into India's vast postal system to reach out to the unbanked population by utilising its over 1.55 lakh offices across the country.

Air India's move to sell off its cargo planes
comes despite India's freight industry expected to grow at 10 per cent per annum by 2014 and the air freight sector set to expand by 8.5 per cent per year for the next five years, according to a Worldwide Independent Network (WIN) survey.

Dedicated freighter services have been launched by various airlines. Air India was the first scheduled passenger airliner in India to enter this market in 2008 and had embarked on a 25 per cent capacity expansion. Despite all odds, airlines like Jet and other formidable players in the logistics industry were also looking at going in for cargo operations but shelved their plans as they plunged into losses.

Air India has already offered to lease out five of its eight Boeing 777-200 planes for ten years to bring in funds. Similarly, it has also decided to go for sale and leaseback of the first seven Boeing 787 Dreamliners that it expects to receive by June this year.

The decision to lease out the Boeing 777s came in the backdrop of the planned induction of the B787s, the first of which is expected to arrive later this month.

Courtesy: Mail Today 

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