Photographer: Dhiraj Singh/Bloomberg

Indian Police to Probe $10.8 Billion Plane Order From 2005

  • Central Bureau of Investigation to conduct probe on Air India
  • India ordered 111 planes from Airbus, Boeing in 2005, 2006

India’s federal investigation agency will probe a decade-old deal by the national carriers to acquire 111 aircraft, which saddled the flag carrier Air India Ltd. with losses, the Central Bureau of Investigation said.

The CBI, as the federal police is known, registered three cases and one preliminary inquiry in the light of orders from the Supreme Court in January, according to a statement dated May 29 on its Website. The cases include investigating allegations regarding buying planes for 700 billion rupees ($10.8 billion), the CBI said. The acquisition allegedly caused a financial loss to the “already stressed” national carrier, it said.

Air India spokesman Dhananjay Kumar and a spokeswoman for Boeing in India declined to comment. Praful Patel, who was India’s civil aviation minister at the time of the purchases, and an Airbus spokesman in India didn’t immediately respond to phone calls seeking comment. India’s civil aviation ministry will co-operate with the CBI probe, Aviation Minister Ashok Gajapathi Raju told reporters in New Delhi.

In December 2005, India’s cabinet gave an approval to the national carrier to buy 68 aircraft from Boeing Co. In 2006, state-owned Indian Airlines Ltd. inked an agreement to buy 43 planes from Airbus SE. While the aircraft orders were made separately, the two national carriers were later merged by 2007 into the National Aviation Co. of India Ltd., which operated under the brand Air India.

Allegations

The CBI said it’s also investigating allegations of leasing of a large number of aircraft “without due consideration.” Also part of the probe will be allegations about giving up profit-making routes by Air India in favor of national and international private airlines, which caused a “huge loss” to the national carrier, it said.

Air India’s aircraft deal was controversial at the time of the purchase itself. A day after the Mumbai-based carrier chose to buy 23 Boeing 777 aircraft and 27 Dreamliners, Nigel Harwood, Airbus’s then vice president of sales for India, said in an interview that the European company wasn’t given a “fair chance.” Air India denied that, saying it took “strong exception” to the claims.

India is considering selling a majority stake in Air India to a strategic partner after a $3.6 billion bailout failed to turn around the loss making national carrier, Bloomberg News reported in February, citing people with knowledge of the matter. The proposal includes reviving Air India within five years of selling a 51 percent stake, they said.

Niti Aayog, the government’s top policy planning body, has suggested options for the future of Air India and the government is studying them, Raju said.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE