Air India to Lease Airbus A320s to Cut Costs, Win Marketshare

Air India Ltd. will add Airbus SAS A320 planes for the first time in three years as the carrier bailed out by the government seeks to cut costs and win marketshare.

The state-owned airline has invited offers from lessors for as many as 19 A320s with sharklets on lease for six years, according to a tender document published on its website. The carrier last purchased A320s between 2006 and 2010, it said.

Adding new narrow-body planes will help Air India reduce costs that’s one of the conditions set by the government for approving a 300 billion rupees ($4.9 billion) bailout through 2020. The Mumbai-based carrier also faces competition from low-cost operators IndiGo that last year became India’s biggest by marketshare and AirAsia Bhd. (AIRA) that’s due to start operations in the South Asian nation this year.

“Strategically, it’s a good move,” said Mark D. Martin, chief executive officer at Dubai-based Martin Consulting LLC. “New planes in the fleet mean lower maintenance costs and a better product to lure customers.”

The so-called sharklets are wingtips that help boost the range of single-aisle jets.

Low-cost carriers control more than 60 percent of India’s domestic skies, according to data available with the Directorate General of Civil Aviation. Air India, the former monopoly carrier, had 18.9 percent share of the market in June behind IndiGo, Jet Airways (India) Ltd. and SpiceJet Ltd. (SJET)

AirAsia, which in March won an Indian panel’s approval to form an airline venture that includes the Tata group in the country, aims to start operations later this year.

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

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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