CAG report tabled in Parliament on Friday revealed that Air India sold its five Boeing planes to Etihad Airways at a significantly lower cost than the indicative market price of the aircraft.
The government-owned Air India sold these five Boeing 777-200 LR planes to the Gulf carrier Etihad for $336.5 million ($ 67.3 million per plane) in 2013 against $86-92 million per aircraft obtained from two parties — M/s AVITAS and ASCENT, the Comptroller and Auditor General (CAG) observed in its report ‘Turnaround Plan and Financial Restructuring plan of Air India Ltd’ (AIL).
In its latest report on the airline, the CAG also observed that AIL incurred a book loss of Rs 671.07 crore on the sale of these planes and payment of Rs 324.67 crore towards interest on loans availed for procurement of these aircraft.
The aircrafts were delivered to Etihad Airways during the period from January 2014 to April 2014.
According to the CAG, two parties — Etihad Airways of UAE and German Aviation Capital, Frankfurt — responded to open tender floated by Air India in May 2013.
“The offer of Etihad for a sum of $336.5 million for five aircraft (Rs 2071 crore) was highest and was approved by Board (October 2013),” it said.
“Audit observed that the price (of $67.3 million per B-777-200 LR aircraft) at which the five aircraft were sold to Etihad Airways was significantly lower than the indicative market price of $86-92 million per aircraft obtained by the company from two parties, M/s AVITAS and M/s ASCENT before initiating the sale process,” the CAG report stated.
According to the CAG, after opening the financial bid, Air India obtained another valuation of the aircraft from Aviation Specialist Group (ASG) who estimated the then market value at USD 93 million to 96 million and the realisable value to be between $ 65 million to $72 million per aircraft.
“Considering that the price offered by Etihad Airways ($67.3 million) was within this range of realisable value, AIL accepted the offer. However, it needs to be appreciated that the basis of acceptance was a valuation exercise carried out after opening the financial bids and that the market value of the aircraft could not be realised in the sale,” according to the report.
