India to probe $10.8bn plane order

India's civil aviation ministry said Tuesday it would cooperate with a federal inquiry into alleged irregularities in the purchase of 111 planes by state-run carrier Air India and its merger with Indian Airlines.

The third case alleges that the national carrier gave up profitable routes and flight timings to private and foreign airlines, thus causing "a huge loss to the national carrier". But the government finally made a decision to buy 68 for Air India from Boeing, and another 43 for Indian Airlines from Airbus.

Sinha added that the Civil Aviation Ministry would fully cooperate with the probe agency.


A set of three FIRs has been lodged to probe alleged irregularities in the purchase of 111 aircraft, leasing of planes while acquisition process was still on, and giving up of profitable routes in favour of national and worldwide airlines by Air India, the spokesperson said.

The Minister's response came a day after the Central Bureau of Investigation (CBI) registered three cases against unnamed officials of the Ministry and Air India. CBI said that the acquisition allegedly caused a financial loss to the "already stressed" national carrier. A year later, Indian Airlines signed up for 43 planes from Airbus SE.

He observed that the strategic and operational logic that would drive a merger has been hard to achieve in the case of Air India-Indian Airlines merger - a matter which is also under the CBI scanner.


The second case involves allegations of leasing of a large number of aircraft without due consideration, the proper study of routes, and a marketing or price strategy.

Another case of criminal conspiracy has been registered for violations under the Prevention of Corruption Act against ministry officials, NACIL, Air India and private companies. 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.

Finance Minister Arun Jaitley had on Saturday favoured disinvestment of Air India, saying the airline's market share was just around 14 per cent whereas its debt burden stood at a staggering Rs 50,000 crore.


The current Air India Chairman-cum-Managing Director Ashwani Lohani had recently said the merger was behind Air India's "downfall".


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