State-run Air India will take delivery of all 27 Boeing 787 aircraft, putting at rest speculation over cutting back the initial order, amid a huge debt burden and mounting losses over recent years.

“It is a good aircraft for Air India. We are not cutting any orders,” India’s aviation minister Ajit Singh confirms.

The delivery of all the aircraft may take up to three years, Singh adds.

The 787s are part of a total of 111 aircraft ordered by Air India and the former Indian Airlines from Boeing and Airbus. Air India ordered 68 aircraft from Boeing in December 2005, and Indian Airlines ordered 43 from Airbus in February 2006. Air India and Indian Airlines merged in 2007 to form Air India Ltd.

The airline is likely to get its first 787 in May this year and seven others in the next fiscal year, Air India’s Chairman and Managing Director Rohit Nandan said earlier this month.

Last September, the then aviation minister Vayalar Ravi had said Air India did not have the funds to pay for the 27 Boeing 787s it has ordered. The statement came a day after the country’s nodal public auditing agency criticized the state-run airline’s hasty expansion plans. 

This had sparked speculation that the government might take delivery of only 12 Boeing 787s, compared with the original order of 27 aircraft. But in November, Air India’s board approved issuing of a Request for Proposal for the 787 aircraft under a leaseback mechanism pending a final clearance from the government. The leaseback arrangement will help Air India to make full use of the asset while not having capital tied up. 

Meanwhile, the federal government in its latest budget presentation unveiled a 40 billion rupee ($800 million) bailout package for the cash-strapped flag carrier.  

Although the cash infusion will provide relief to the state-run carrier, which has been struggling with high fuel prices and a large debt load, the package is smaller than the 55 billion rupees that had been expected.

Air India has failed to turn a profit since its merger with state-owned domestic operator Indian Airlines in 2007, and has amassed losses of about 181 billion rupees in the three years ended March 31, 2010. The carrier has a total debt of nearly 430 billion rupees. 

The induction of the 787 aircraft is part of the restructuring plan for the cash-starved national carrier which has working capital loans aggregate about 450 billion rupees ($9 billion).

The first aircraft was scheduled to be delivered in 2008. Air India and the Indian government expect over $500 million in compensation from Boeing for the delays in delivering the 787s.