AI move to acquire 111 planes a recipe for disaster: CAG

The decision to acquire 111 planes by Air India through debt was "a recipe for disaster" and should have raised alarm in the government, the Comptroller and Auditor General (CAG) has said.
Terming the move for getting of a "large number" of planes as "risky", the CAG said the aircraft acquisition had "contributed predominantly" to the airline's massive debt liability of Rs 38,423 crore as on March 31 last year.
In its latest report tabled in Parliament today, the public audit body also called the merger of two erstwhile state-run carriers - Air India and Indian Airlines "ill-timed" and said that "the financial case for the merger was not adequately validated prior to the merger".
"The entire acquisition (for both Air India and Indian Airlines) was to be funded through debt (to be repaid through revenue generation), except for a relatively small equity infusion of Rs 325 crore for Indian Airlines.
"This was a recipe for disaster ab initio and should have raised alarm signals in Ministry of Civil Aviation, Public Investment Board and the Planning Commission", the report said.Significantly, the CAG recommended, among other measures, "a total hands-off approach (by the government) with regard to the management of the airline".
The report dealt with several aspects of the ailing national carrier's losses, fleet acquisition, merger, huge debt burden, delay in joining the global airline grouping Star Alliance and its financial and operational performance.
08/09/11 PTI/Moneycontrol.com