Inside Air India’s Plan To Finance The Mammoth Aircraft Order

 ow that the dust has settled on Air India’s massive aircraft order announcement, the big question is how the airline plans to finance it. At the CAPA India Aviation Summit, Air India’s CEO Campbell Wilson spoke about how the aircraft will be acquired over the next several years and expressed his confidence in arranging the funds.

Not worried about financing

Air India will acquire the 470 planes it has ordered from Airbus and Boeing through a combination of sale and leaseback, cash, and equity. In fact, the airline has already paid down payments for some of the planes from its internal funds, confirmed CEO Campbell Wilson

He commented on how the initial process for leaseback is already underway and that Air India has asked leasing companies to submit proposals for potential deals.

But given that India is also a graveyard for several airlines that shut shop in the last decade and a half, how excited would lessors be to enter into a significant financial agreement? Wilson is confident that the carrier will not face any roadblocks in securing loans or financial deals, given the change of ownership it underwent last year. Reuters quoted him as saying,

Loans

Air India is in conversation with banks to finance aircraft purchases. And though Wilson didn’t say which banks the airline is talking to, Business Line learned from sources that one of them is the Bank of America.

The report says that Air India is looking to secure three short-term loans, each valued at $1 billion. The airline will use these for the purchase, sale and leaseback security for some of the planes on order, as well as refurbishing its existing aircraft. The loans will be on top of the funding that Air India will receive from the Tata Group. Business Line quotes a source as saying,

Opportunities ahead

India’s aviation recovery has been somewhat faster than the rest of the world, given its large domestic market. Projections from the industry, be it Boeing, Airbus, or agencies like CAPA, indicate that the country will need thousands of new aircraft over the next decade and beyond. Wilson added at the CAPA Summit,

Air India is also keen on creating a strong brand that would compete with the best airlines in the world for international travel. And while the planes to support that plan have been ordered, the somewhat complex process of financing that purchase has just started.