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Airlines

Air India Explores Sale and Leaseback Options to Ease Debt Burden

Strategic Insights

— 1 min read

Air India is exploring various options, including sale and leaseback and structured leasing, to acquire 27 Boeing 787 planes and reduce its significant debt burden. The airline has a debt of Rs 42,570 crore and an accumulated loss of Rs 22,000 crore, prompting it to seek an immediate equity infusion of Rs 6,600 crore from the government. If these options do not materialize, Air India will have to rely on bank loans, which may further exacerbate its financial woes. The sale and leaseback route offers tax breaks and allows airlines to generate additional capital, making it an attractive option for debt-ridden airlines like Air India.

Key Takeaways:

  • Air India is exploring the sale and leaseback route for acquiring 27 Boeing 787 planes, which can ease its debt burden and provide tax breaks.
  • The airline is also considering structured leasing, where a special purpose vehicle owned by a finance company acquires the planes and leases them out.
  • Private airlines such as SpiceJet, Jet Airways, Kingfisher Airlines, and IndiGo have used the sale and leaseback route to expand their fleets.
  • Air India had previously used structured leasing to acquire some of its wide-body planes in the late 1980s and early 1990s.
  • The airline is in the process of raising $850 million to fund the first seven Boeing 787 planes.

Statistics:

  • Air India's debt burden stands at Rs 42,570 crore.
  • The airline has an accumulated loss of Rs 22,000 crore.
  • Air India requires an immediate equity infusion of Rs 6,600 crore from the government.
  • The airline needs a total infusion of Rs 42,920 crore till fiscal 2021, including guarantees for aircraft loans worth Rs 30,584 crore.
  • Air India's outstanding debt for aircraft purchase has risen to Rs 20,000 crore, accounting for almost half of its total debt.

Sources:

  • "Air India explores sale and leaseback route to ease debt burden" by P.R. Sanjai & Joel Rebello, published in The Mint, July 25.
  • "Raising $850 million to fund first 7 Boeing 787 planes" from the article cited above.
  • "Air India's debt burden stands at Rs 42,570 crore" from the same article.
  • "Air India requires immediate equity infusion of Rs 6,600 crore" from the article.

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