MODILUFT'S plans to expand its fleet could be hampered by the refusal of the Indian Government to permit it to undertake a bond issue to fund the acquisition of additional aircraft.

The Delhi-based domestic carrier is already faced with the prospect of finding replacements for its entire fleet, which consists of six Boeing 737s - three -200s leased from Lufthansa and three -400s leased from GPA/GE Capital Aviation Services (GECAS) through Air UK.

Lufthansa claims that Modiluft has failed to meet its financial commitments, and is attempting to recover its three 737-200s (Flight International, 5-11 June). The three GECAS 737-400s will be returned early in 1997, and transferred to KLM (Flight International, 26 June-2 July).

Modiluft says that it has received approval from the Indian director-general of civil aviation to increase its fleet to eight aircraft. Talks are being held with a number of potential sources regarding the lease of either 737s or Airbus A320s, with the acquisition of four additional aircraft planned by the end of 1996. Sources have suggested that the airline has already finalised the lease of aircraft to replace the outgoing Lufthansa 737s.

The Indian industry ministry has, however, refused Modiluft's planned $60 million global depositary-receipt issue, which had earlier been approved by the previous Indian Government's foreign-investment promotion board. Without this bond issue, the planned acquisitions may be delayed until an alternative source of financing can be arranged.

Source: Flight International