Air India looks for funding options to support delivery of new aircraft from lessors

Air India has initiated the financing process for its multi-billion-dollar aircraft order by inviting leasing companies to propose sale-leaseback deals. This move is aimed at securing funding for the Tata-owned airline’s massive spending on new aircraft, estimated at around $70 billion before discounts. Industry experts remain optimistic about the aviation sector’s ability to weather recent turbulence in the banking sector, and aircraft lessors are expected to play a crucial role in supporting Air India’s ambitious expansion plans.

Air India’s CEO, Campbell Wilson, has confirmed that the airline has reached out to the leasing market to secure financing for its recent aircraft order. Despite the recent takeover by Tata Group, Wilson expressed confidence in the airline’s ability to finance the order. In response to questions about whether Air India had solicited lessor bids for the 470-plane order, Wilson stated that they had done so for “portions of it”. He also noted that the delivery of the planes would take place over several years and not all at once.

The first few Airbus A350 aircraft, originally sold to Russia’s Aeroflot, are due to arrive later this year.

Wilson expressed confidence in Air India’s ability to fund the orders.

“The benefit of having a strong, patient capital provider like Tata does accord us a lot of flexibility.”

In sale-leaseback deals, lessors buy jets from an airline the moment they are delivered and rent them back – a potentially profitable deal for both sides if conditions work.

India’s largest airline, IndiGo, has regularly used the financing tool for the past decade as it built up a large fleet.

“As India as a country grows, and Indian aviation grows, it will also be viewed as a more mature and maturing market,” IndiGo CEO Pieter Elbers told Reuters at the same event.

Despite Air India’s recent aircraft order and the airline’s efforts to secure financing through sale-leaseback deals with lessors, some experts believe that lessors may be cautious about increasing their exposure to the Indian aviation market. This is due to several factors, including past disputes over the repossession of jets and the country’s slow implementation of a key treaty on lessor rights. Aviation advisor Bertrand Grabowski suggests that many lessors may be reluctant to have more than 15-20% of their portfolios exposed to India, as it remains a complicated, bureaucratic, and inefficient jurisdiction that may not be easy for foreign banks to operate in. Source