Air India for $1.5 bn mop up to fund Boeing aircraft buys

12 June, 2007:

National carrier Air India has hinted at plans to raise over $1.5 billion to part fund its $9bn order for 68 Boeing aircraft. According to a report, the state run carrier is also planning to adopt a sale-and-lease-back program. The airline will pay 15 per cent of the total amount as advance in the form of pre-delivery payments and 85 per cent as delivery financing. It has earlier been reported that Air India has ordered 68 passenger jets from US aerospace giant Boeing last year.

The airline has kicked off the process by calling for bids from banks and financial institutions for the second tranche of aircraft deliveries beyond December 2007 up to March 2009, as PDP in respect of aircraft and spare engines to be delivered during 2008 and 2009, said the report. It has also invited financing packages for Exim Bank, US guaranteed facility for $1.06 billion and commercial facility of $181.85 million for 10 aircraft comprising a combination of Boeing family aircraft including B777-200 LRs, B777-300 ERs and B787s, the report added.

Meanwhile, the airline has lined up plans for an alliance or acquisition of an equity stake in Serbia's national carrier Jugoslavenski Aerotransport (JAT). A hub for the carrier at Belgrade, which is JAT's home base, is expected to provide Air India with a strategic opportunity as like other international airlines, the carrier is already facing congestion across most of the key European airports that it operates in, said a report. Moreover, a tie up with Air India's access to a rapidly increasing air traffic from the Indian sub-continent would be an added opportunity for JAT too.