CAG wants to know why Air India sold 5 Boeing 777s to Etihad at a loss

The question why state-run carrier Air India sold five Boeing 777s at a loss to Etihad in 2013 was keeping the Comptroller and Auditor General (CAG) awake for a long time. That is why CAG has sought civil aviation ministry’s response on why this deal was allowed during the tenure of the previous United Progressive Alliance government, reported Economic Times.

"The CAG's query addresses two aspects - one is of selling the aircraft only after six years of operations, when they were meant to fly 25 years, and the second is on selling it at much lower that its cost price," said a civil aviation ministry official, who did not want to be identified. The initial query is part of the CAG's inquiry procedure.

Questions around this Air India and Etihad deal for $350 million were earlier reported in media by the former comptroller and auditor general Vinod Rai in his 2014 book 'Not Just an Accountant'.

In his book, Rai had said, "Why did we make purchases and within five years of the delivery of the aircraft, sell them at roughly 427 crore each to Etihad Airways after having purchased them in 2005 for 1,300 crore per aircraft?"

What Air India told ET in its defense is as follows. “…the long-range planes were not fuel efficient and that it (Air India) was losing money on its overseas flights, including to the US and Japan. Airline executives said it lost 1 crore per flight to the US. It lost money on flights to Japan even with a load of 80%.”

The CAG’s move has been welcomed by Jeetendra Bhargava, a former executive director at Air India and a known critic of the carrier. He said the decision to order the planes in 2005 should also be examined. This had been part of Air India's 111-aircraft order at the time for both Boeing and Airbus planes.

Etihad is currently using the aircraft to connect Abu Dhabi to destinations in the US. The Boeing 777-200-LR has a range of 17,370 km, allowing it to connect almost any city in the world from Etihad's Abu Dhabi hub.

(Image: Reuters)