Air India will purchase the 470 planes it has ordered from Airbus and Boeing through a mix of sale and leaseback, cash, and equity. According to CEO Campbell Wilson, the airline has already paid down payments on some of the planes using internal funds.
He mentioned that the initial leaseback process is already underway and that Air India has requested leasing companies to submit proposals for potential deals.
But, given that India is also the final resting place for several airlines that have gone bankrupt in the last decade and a half, how enthusiastic would lessors be to enter into a significant financial agreement? Wilson is confident that the carrier will not face any difficulties in obtaining loans or financial deals as a result of the ownership change that occurred last year. According to Reuters, he stated,
“The airline is likely to receive 50 aircraft over the next two years. A part of the said aircraft will be sale and leased back (SLB) which will help the company generate a small profit. However, there is security needed for the SLB for which one of the short-term loans will be used. The second loan will be for the purchase of a few of the 470 aircraft.”
Given its large domestic market, India’s aviation recovery has been somewhat faster than the rest of the world. According to industry projections, whether from Boeing, Airbus, or agencies like CAPA, the country will require thousands of new aircraft over the next decade and beyond. Wilson also stated at the CAPA Summit,
“So the principal driver (for the plane order) was really recognizing the opportunity for Indian aviation and putting in place the investment in the capacity of the aircraft in order to realize that for India’s benefit.”
Air India is also keen on building a strong brand that can compete with the world’s best airlines for international travel. While the planes needed to support that plan have been ordered, the somewhat complicated process of financing that purchase has only recently begun.
