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AI plans legal action as Airbus cries foul in $7b Boeing deal

DUBAI — In the latest twist to the raging row over the $7 billion order Air India has placed with Boeing, the Indian carrier yesterday lambasted Airbus Industrie's demand for a probe into its decision to opt for the US brand, and said it was even considering legal action against the European aircraft maker for "making a statement that is beyond all norms of propriety."

The tit-for-tat remark came from Air India Chairman and Managing Director V. Thulasidas, who said Airbus had no right to complain about the move. "While we can understand the frustration on the part of a losing bidder, this is quite outrageous and unwarranted," he said in Dubai.

Air India was caught in the middle of the long-drawn out war between the aircraft rivals with its 50-aircraft order on Tuesday including eight Boeing 777-200 LR (Long Range), 15 Boeing 777-300 ER (Extended Range) and 27 Boeing 787. While the deal has yet to be approved by the Indian government, Airbus executives began protesting the pending deal and asked for a government inquiry into it.

The European manufacturer had claimed it was not given a chance to make a presentation on its super jumbo A380, although Boeing was allowed to make such a case on 787s, which will not fly before 2007. "What we would like to see is an apple-to-apple comparison. That has not happened so far," said David Velupillai, regional press manager, communications, Airbus Central Entity. "It is in the best interest of India that the deal should be open, fair and transparent, which is clearly not the case. We are looking for a level playing field." Velupillai said.

Another charge by Airbus was that tender norms were changed to help Boeing win the deal. Denying that any such changes were made after the Request for Proposal was issued to both the aircraft manufacturers, Thulasidas said the decision of the 10-member A-I board to go for the Boeing aircraft would be implemented only after clearance from the central government. "It was purely a business decision as we have taken into account only the comparative merit points in deciding on Boeing. The technologies of Boeing and Airbus were comparable and Air India had decided on the most cost-effective thing," he said while ruling out any political dimensions.

Thulasidas said the purchase would also be subject to the purview of the Comptroller and Auditor General of India and the Central Vigilance Commissioner. Financing of the deal would be done through export credit and commercial borrowings.

On Friday, Civil Aviation Minister Praful Patel, who along with Kerala Chief Minister Oommen Chandy arrived in Abu Dhabi on the Air India Express' maiden flight, said the government had formed an oversight committee to look into the entire process of purchase of new aircraft.

The 777-200 LR medium capacity ultra long-range aircraft would seat 250 passengers in a three-class configuration and is presently undergoing test flights, while the 777-300 ER 350-seater is in service with several airlines. The Boeing 787 Dreamliner, with 25 per cent fuel efficient engines, will seat 250 in a two-class configuration and is expected to enter commercial service in 2008.

He said Air India has to spend Rs 6 billion additionally on account of higher fuel prices as only 10-15 per cent of the price hike is met by fuel surcharges. He said Air India would have some 75-80 aircraft in its fleet within five years. Apart from this, Air India will upgrade some of its existing aircraft, and "in a few years, we will have one of the most modern and youngest fleets."