Air India shelves plans for leasing out 777s

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Air India has shelved plans to lease out part of its Boeing 777 fleet but could reassess leasing out 777-200LRs once it starts taking delivery of new Boeing 787s.

ATI reported in May that Air India was negotiating deals to sublease six 777-300ER/200LRs to Air Canada, Thai Airways International and Reunion Island-based Austral. The three carriers all responded to a tender initially issued by Air India early this year as part of a cost reduction plan.

Air India executive director planning and international relations Tridib Kumar Palit tells ATI the carrier has since opted against completing any of the lease deals because "we were not getting offers which were actually offsetting the financing cost of the aircraft". He says the original decision to lease out the aircraft was also controversial because the government-owned carrier would need to axe some of its long-haul routes once the six widebodies exited the carrier's fleet. Palit explains the Indian government was not willing to accept shrinking Air India's network, especially under a scenario in which the carrier would have to incur a loss in order to lease out aircraft.

Palit says while Air India is currently not considering leasing out any of its aircraft it may re-examine this option after it starts taking delivery of new Boeing 787s. He explains the 787s will allow Air India to lease out or sell some of its 777s without cutting any routes because the 787s will replace 777s on some medium-haul routes.

Air India has 27 787s on order for delivery starting next year. "Once they [the 787s] start coming in significant numbers than pulling out of the LRs is a possibility," Palit says.

Air India currently operates a fleet of eight 777-200LR and 12 777-300ERs, according to Flightglobal's ACAS database. Palit says six of these 777-200LRs are now being used "sub-economically" on medium-haul routes to Europe and North Asia.

He says Air India could ultimately sell or lease four to six of its 777-200LRs depending on whether it decides to launch a new ultra long-haul route. Palit says Air India's New York-Mumbai route is the only route which currently requires 777-200LRs but the carrier is looking at launching San Francisco-Delhi, which can also only be operated non-stop with 777-200LRs.

Air India's other three non-stop routes to North America - New Delhi to New York, Chicago and Toronto - are now served with 777-300ERs. Palit says on these routes the 777-300ER is more economical than the 777-200LR because of the -300ER's higher payload.

Palit says San Francisco is enticing because it is the largest US-India market Air India is currently not serving. But he acknowledges there is a concern the route cannot be operated profitability with a 777-200LR given the high passenger yield that would be needed to sustain the service.

Palit says Air India is looking forward to taking 787s as the carrier currently lacks medium-size widebodies. Air India is now slated to start receiving 787s next June although additional delays are likely due to the recent setbacks in the 787 development programme.

There is also some uncertainty if the 787 will perform to spec, Plait says. "When they offered us the aircraft they offered a 15% to 20% cost advantage over the A330. I'm not sure if today with all the changes if the aircraft still has that kind of advantage," he says.