Air India Express to refinance Rs 800-crore debt

Plans to induct six planes and is exploring the option of plying flights to Iran and CIS

Air India Express plans to refinance about Rs 800 crore working capital debt in order to reduce its interest burden, the airline’s chief executive officer K Shyamsundar said. The airline hopes to save about Rs 100 crore annually on interest outgo following the exercise.

The airline will  also induct six Boeing 737 planes on lease and is exploring services to Iran and CIS countries besides expanding on existing routes, he added. The loan refinance and capacity addition are part of its plan to improve earnings.

Air India Express  is a no frills brand of Air India. It reduced its net loss by 82 percent to Rs 61 crore in FY15 owing to an increase in revenue and lower fuel and lease expenses. The financial results were finalised on Friday.

At present it has 17 Boeing 737 planes and largely serves Gulf and South East Asia routes. It has been facing intense competition from IndiGo, Jet Airways and other foreign airlines.

The airline’s fleet size shrunk from 21 aircraft in FY14 with the expiry of aircraft lease terms.  Revenue grew 10.8 percent to Rs 2,621 crore and fleet utilisation improved from 8.45 hours to 11.30 hours daily. “Our earnings before interest tax depreciation and amortisation grew from Rs 298 crore to Rs 568 crore in FY15. We made a cash profit of Rs 172 crore,” the airline’s chief finance officer M Manoharan stated.

The airline is in discussion with foreign lenders to reconvert about Rs 800 crore of its working capital debt to low interest dollar loans. Totally the airline has non aircraft related bank borrowings of Rs 1,200 crore and these have interest rates of 12-14 per cent. Additionally it  has outstanding of about Rs 1,000 crore payable to Air India and pays annual interest on that sum.  

Last year the airline’s interest outgo was around Rs 400 crore and the management hopes the refinancing would lower its interest burden by around Rs 100 crore.