India's federal law agency probing $15 billion purchase of 111 aircraft by loss-making national air carrier

India's Central Bureau of Investigation said that the purchase of 111 aircraft a decade ago caused a financial loss to the "already stressed".
India's Central Bureau of Investigation said that the purchase of 111 aircraft a decade ago caused a financial loss to the "already stressed".PHOTO: AIR INDIA

NEW DELHI (Bloomberg) - 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 with losses, the Central Bureau of Investigation said.

The CBI, as the federal law agency is known, registered three cases and one preliminary inquiry in light of orders from the Supreme Court in January, according to the statement dated May 29 on its website.

The cases include investigating allegations regarding buying planes for 700 billion rupees (S$15.02 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.

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., which operated under the brand Air India.

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 favour 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 US$3.6 billion (S$5 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 per cent stake, they said.