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UPDATE 1-India's aviation ministry to cooperate with probe into Air India deals
May 30, 2017 / 10:00 AM / 6 months ago

UPDATE 1-India's aviation ministry to cooperate with probe into Air India deals

* CBI registers three cases against Air India

* Air India losing market share to private local carriers

* Decision on Air India’s future to be made in 3 months - official (Adds details from CBI statement, context)

NEW DELHI, May 30 (Reuters) - India’s civil aviation ministry will cooperate with a federal investigation into alleged irregularities in the purchase of 111 aircraft by state-run carrier Air India and into its merger with Indian Airlines, the civil aviation minister said on Tuesday.

The Central Bureau of Investigation (CBI) said on Monday it had registered three cases against Air India and launched a preliminary investigation into "unknown" officials at the civil aviation ministry. (here)

All the cases relate to decisions and deals made under the previous Congress party government, which lost power in 2014.

Air India purchased 111 aircraft for about 700 billion rupees ($10.8 billion) a decade ago, and the CBI said the deal was damaging, benefiting foreign planemakers while landing Air India with losses.

The CBI is also investigating Air India’s decision to lease a large number of aircraft which it said was “without due consideration, proper route study and marketing or price strategy.”

The third case relates to why profit-making routes flown by Air India were axed, a move the agency said helped rival private airlines while causing “a huge loss to the national carrier”.

The agency has also launched a preliminary case against “unknown” officials at the ministry of civil aviation into allegations relating to the merger of India’s two national carriers - Air India and Indian Airlines - that it said deprived the national exchequer of funds when the financially stretched airline was bailed out later.

“Whatever knowledge we have, we will cooperate with them,” Civil Aviation Minister Ashok Gajapathi Raju told reporters in New Delhi, referring to the CBI.

The CBI initiated its probe on the orders of India’s top court in January, and it said further investigations were continuing.

Loss-making Air India has seen much of its market share disappear to fast-growing private local carriers and international airlines in the last decade.

Raju said all options were open when asked about comments this month from India’s finance minister Arun Jaitley, who said the government should consider privatising Air India.

A civil aviation ministry official said a decision on the future of Air India is likely to be made within the next three months. ($1 = 64.6300 Indian rupees) (Reporting by Aditi Shah; Editing by Malini Menon and Muralikumar Anantharaman)

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