Even as instances of technical snags in Boeing Dreamliners are reported from across the world, Air India has made $150 million through the sale and leaseback of the six Boeing-787s delivered to it in the last four and a half months.
In 2005, the state-owned carrier had placed an order for the Dreamliners at a price of $90 million an aircraft. Last year, it sold these at an average of $115 million — a profit of $25 million from each aircraft. The funds would be used to partly repay the bridge loan of $695 million it had taken to buy the aircraft. Bridge loans are usually used to meet payment commitments until long-term financing is arranged.
Meanwhile, Air India has scrapped its plan to sell five Boeing 777s, as it couldn’t find buyers for these. The company had planned to sell two Boeing 777 200-LR (long range) aircraft and three Boeing 777 300-ER (extended range) aircraft. It was considering reconfiguring these aircraft (changing the number of seats in each class) to deploy the Boeing 777-200 LR on the Saudi Arabia route and the B777-300 ER on the North America route.
| AIR INDIA OPERATIONAL WIDE-BODY FLEET | |
| Wide-body | Fleet details |
| B-787 Dreamliner | 6 sale & leaseback |
| B-777 -200 LR | 8 owned |
| B-777- 300 ER | 12 owned |
| B-747-400 | 3 owned + 2 sale & leaseback |
| A-330-200 | 2 drylease |
| Wide-body total | 33 |
| Wide-body aircraft is used to fly on long-haul routes Source: Air India website & Ministry of Civil Aviation | |
Speaking to Business Standard, a senior Air India official said, “We are doing sale and leaseback of Dreamliners on a continual basis. We have been facing no loss of appetite for it among lessors. The reason, in part, is lessors have an assured client — Air India. Moreover, any machine takes time to settle down.”
The company plans to sell all its 27 Dreamliner aircraft to a leasing company and operate these by paying monthly rentals, a common fundraising practice among airlines.
Sale and leaseback deals are considered prudent steps for airlines in a market in which most other sources of funding are fast drying up. Additional loans would add to the burden on Air India’s overleveraged balance sheet. Of its 33 wide-bodied aircraft, 23 are owned by Air India, sale and leasebacks account for eight and two are on dry lease (leased without a crew).
To generate revenue, Indigo, Jet and a few other airlines are increasingly opting for sale and leaseback arrangements.
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Of Air India’s bridge loan, as of now, $195 million has been financed by Standard Chartered for two Dreamliners, while $500 million has been financed by a different company. Air India has told its lenders though the bridge loan for a 6-12 month period (covering the entire cost of the aircraft) wouldn’t be covered by government guarantees, the planes would be offered as security.
Japan’s All Nippon Airways, Japan Airlines and Ethiopian Airways are among those operating Dreamliners.