Paramount Air Plans To Buy Up To 15 Passenger Jets

India's Paramount Airways Pvt. Ltd. plans to order up to 15 passenger jets from Boeing Co. (BA) or Airbus - at an estimated total cost of $1.5 billion - after a delay of nearly a year.

Unlisted Paramount plans to use the planes to start flights to South East Asia and the Middle East from mid-2011, Managing Director M. Thiagarajan told Dow Jones Newswires in a recent interview.

"We will decide on the type of fleet in one or two months, latest by July," Thiagarajan said. "Talks with both Boeing and Airbus have progressed substantially."

Paramount is considering buying Boeing's 777 and 787 jets as well as the A330 and A350 planes from Europe's Airbus, Thiagarajan said.

Paramount, founded by a textile company in the southern Madurai city, began operations in October 2005.

Paramount, India's sole business-class only airline, now operates flights to south, west and east India using five planes from Brazil's Empresa Brasileira de Aeronautica SA (ERJ), or Embraer, each with a capacity of 70 to 75 seats.

Paramount also plans to increase the size of its Embraer fleet to 20 by December 2010.

More orders for Airbus or Boeing will be a boost to the two aircraft makers who are facing a slowdown in new plane purchases as air traffic falls worldwide because of the financial turmoil.

Indian carriers ordered more than 410 commercial planes worth about $40 billion from Airbus and 164 planes worth about $25 billion from Boeing since 2004.

Paramount had planned to order the long-haul jets in the first-half of 2008, but deferred the plan until this year to gauge market conditions following the global economic slowdown.

The current slowdown in the global aviation industry was helping Paramount "negotiate for better deals," he said.

Thiagarajan said the new planes will be purchased from Paramount's cash flow and debt from either the U.S. Exim Bank or other overseas lending institutions.

"We may keep it (the planes) on the balance sheet as otherwise in a sale and leaseback you have to pay higher lease rental, which pushes up your monthly operating costs," Thiagarajan said.

Under a sale and leaseback arrangement, airlines sell their old or new planes to a leasing company and then rent the same aircraft for their fleet. This is popular with smaller and low-fare carriers as it allows them to avoid tying up large amounts of working capital.

"But, it is too early to tell if it will be a sale and leaseback," Thiagarajan said. "Most likely not."

Source://online.wsj.com