The grounding of the six Boeing 787 Dreamliners is likely to impact Air India’s plans to report positive operating cash flows this fiscal, as earnings from the ‘sale and lease back’ of these aircraft is one of the key components that the carrier was banking on to turnaround its operations.
According to officials in the ministry of civil aviation, the airline had pinned hopes on three things for a rebound in its operating cash flows or the earnings before interest, taxes, depreciation and amortisation or EBITDA this fiscal.
They are: the sale of land near Air India’s registered office in New Delhi; renegotiation of contracts with oil marketing companies; and the proposed sale and lease back of the six Dreamliners that are currently grounded after a DGCA advisory issued on Thursday.
“The sale of land in Delhi is set to give Air India Rs 600 crore and the sale and lease back of the Dreamliners is likely to give another Rs 500 crore, which was expected to help boost earnings this financial year. The grounding of the planes has put a spanner in the works,” said a senior ministry official.
Especially so, since it is not clear by when the aircraft would be declared airworthy by global aviation regulators.
According to ministry estimates, the airline would make an estimated Rs 90 crore per aircraft through the sale and leaseback arrangement.
“The first six Dreamliners have come at a cost of $98 million per aircraft and the sale will happen at a rate of $115 million. So, the earnings per aircraft is in the range of $17 million (around Rs 90 crore),” said the official.
Any delay in the sale and lease back plan, which was to contribute 50 per cent to the extra earnings of the airline, will hold back any chances of Air India reporting operational profits. To make matters worse, the third component — negotiating a better deal with oil companies — is unlikely to happen this year.
Senior Air India officials say that they are not sure of finalising a deal from oil companies, aimed at extracting a discount of up to Rs 5,000 per kilolitre, during the current fiscal.
“Talks are on.... but it seems unlikely (in this fiscal). With this deal, we were factoring in savings of Rs 500 crore on our annual fuel bills,” said the official. The national carrier’s annual fuel bill is around Rs 8,000 crore.