Air India may sell aircraft to raise around $600 million
Sale of the five 777-200s will alone fetch the carrier $500 million, and the 747s are expected to fetch $30 million each
P.R. Sanjai
Mumbai: Air India, the money-losing flag carrier that is seeking a government bailout, is expected to raise about $600 million (around Rs. 3,200 crore) by selling seven planes as part of a plan to pare its debt by March, according to two airline executives familiar with the development.
Of the seven aircraft, five Boeing 777-200 long-range planes will be sold and taken back on lease for 12 years, while two Boeing 747-400 aircraft are meant for outright sale, the executives said, requesting anonymity.
Sale of the five 777-200s will alone fetch the carrier $500 million, and the 747s are expected to fetch $30 million each, they said.
Air India has also sought the Reserve Bank of India’s (RBI) approval for a special arrangement to treat the company’s debt, if the carrier fails to pay dividends due to the banks within the prescribed eight-quarter limit.
The airline, which has a total debt of Rs. 43,777 crore, including loans and dues it owes to vendors such as oil companies and airport operators, is in the midst of a debt restructuring programme scripted by SBI Capital Markets Ltd.
Representatives of investment bankers and lenders said a final approval for the financial restructuring plan by RBI may happen next week.
The Air India executive said the carrier has repaid $800 million of loans since September 2007. “The sale-and-leaseback agreement is backed by the sovereign guarantee. While selling seven Boeing 787s, we will fetch a premium,” he said.
The first Boeing 787 plane will join Air India’s fleet by the end of this month. The delivery of that plane will be taken by the company selected for the sale-and-leaseback arrangement. The 787 will replace the routes being serviced by the 777s.
State Bank of India chairman Pratip Chaudhuri said Air India may not be able to make a profit to pay dividends on preference shares in the near term, and hence the carrier is asking for more time to pay the dividend.
Other lenders to Air India include Bank of India, Punjab National Bank, Bank of Baroda and Central Bank of India.
“The total outgo in terms of interest for Air India is Rs. 3,400 crore, including working capital and long-term loans. The debt restructuring will give them a relief of Rs. 1,000 crore. The selling of planes may yield more cushion,” said the consultant, who advises several airlines excluding Air India. “The real challenge is to bring back the passengers that they have lost to private carriers. They have to enhance their service levels and ensure reliability. It has to strike a balance between financial and operational turnaround.”
Apart from the financial restructuring programme, the airline has asked the government for an immediate equity infusion of Rs. 6,750 crore to tide over the crisis.
Air India is seeking a total equity support of Rs. 42,920 crore till fiscal 2021. The carrier also wants government guarantees for aircraft loans worth Rs. 30,584 crore till fiscal 2021, according to the latest plan submitted to the government.
Indian airlines are set to post a record loss of $2.5 billion on a total projected revenue of $10 billion this fiscal year, according to the estimates of Centre for Asia Pacific Aviation (Capa). Private airlines, excluding IndiGo, will account for $600 million of that loss; the rest will be borne by Air India, according to Capa.
Sale of the five 777-200s will alone fetch the carrier $500 million, and the 747s are expected to fetch $30 million each
P.R. Sanjai
Mumbai: Air India, the money-losing flag carrier that is seeking a government bailout, is expected to raise about $600 million (around Rs. 3,200 crore) by selling seven planes as part of a plan to pare its debt by March, according to two airline executives familiar with the development.
Of the seven aircraft, five Boeing 777-200 long-range planes will be sold and taken back on lease for 12 years, while two Boeing 747-400 aircraft are meant for outright sale, the executives said, requesting anonymity.
Sale of the five 777-200s will alone fetch the carrier $500 million, and the 747s are expected to fetch $30 million each, they said.
Air India has also sought the Reserve Bank of India’s (RBI) approval for a special arrangement to treat the company’s debt, if the carrier fails to pay dividends due to the banks within the prescribed eight-quarter limit.
The airline, which has a total debt of Rs. 43,777 crore, including loans and dues it owes to vendors such as oil companies and airport operators, is in the midst of a debt restructuring programme scripted by SBI Capital Markets Ltd.
Representatives of investment bankers and lenders said a final approval for the financial restructuring plan by RBI may happen next week.
The Air India executive said the carrier has repaid $800 million of loans since September 2007. “The sale-and-leaseback agreement is backed by the sovereign guarantee. While selling seven Boeing 787s, we will fetch a premium,” he said.
The first Boeing 787 plane will join Air India’s fleet by the end of this month. The delivery of that plane will be taken by the company selected for the sale-and-leaseback arrangement. The 787 will replace the routes being serviced by the 777s.
State Bank of India chairman Pratip Chaudhuri said Air India may not be able to make a profit to pay dividends on preference shares in the near term, and hence the carrier is asking for more time to pay the dividend.
Other lenders to Air India include Bank of India, Punjab National Bank, Bank of Baroda and Central Bank of India.
“The total outgo in terms of interest for Air India is Rs. 3,400 crore, including working capital and long-term loans. The debt restructuring will give them a relief of Rs. 1,000 crore. The selling of planes may yield more cushion,” said the consultant, who advises several airlines excluding Air India. “The real challenge is to bring back the passengers that they have lost to private carriers. They have to enhance their service levels and ensure reliability. It has to strike a balance between financial and operational turnaround.”
Apart from the financial restructuring programme, the airline has asked the government for an immediate equity infusion of Rs. 6,750 crore to tide over the crisis.
Air India is seeking a total equity support of Rs. 42,920 crore till fiscal 2021. The carrier also wants government guarantees for aircraft loans worth Rs. 30,584 crore till fiscal 2021, according to the latest plan submitted to the government.
Indian airlines are set to post a record loss of $2.5 billion on a total projected revenue of $10 billion this fiscal year, according to the estimates of Centre for Asia Pacific Aviation (Capa). Private airlines, excluding IndiGo, will account for $600 million of that loss; the rest will be borne by Air India, according to Capa.
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