AI to raise $1.5bn to part-fund Boeing buys

National carrier Air-India, which has placed a $9 billion order to acquire 68 Boeing family aircraft, is planning to raise over $1.5 billion to part-fund the acquisition programme.

The government-run airline is also planning to adopt an innovate borrowing structure including sale and lease back programmes, a popular aircraft financing method for private domestic airlines.

Air India has already floated enquiries calling for bids from banks and financial institutions for the second tranche of aircraft deliveries beyond December 2007 up to March 2009, as pre-delivery payments (PDP) in respect of aircraft and spare engines to be delivered during 2008 and 2009.

The airline will have to pay 15% of the total agreed amount as advance in the form of PDP and 85% as delivery financing.

S Venkat, executive director (finance), Air-India said: "The financing packages have been invited for Exim Bank, US guaranteed facility for $1.06 billion and commercial facility of $181.85 million for 10 aircraft comprising a combination of Boeing family aircraft including B777-200 LRs, B777-300 ERs and B787s."

"The PDP facility has been invited for 14 aircraft amounting to $467.25 million."

Venkat said the airline is also examining financing packages from banks which are not based on the Exim Bank, US or a Indian government backed sovereign guarantee.

However, he declined to comment whether the PSU carrier would opt for sale and lease back.

But sources said the airline has already executed sale and lease back agreement for old aircraft adding "Air-India is also looking at similar agreements for brand new aircraft."

A similar enquiry has been floated for financing five B737-800 aircraft and 3 spare engines to be delivered during the period January 2008 and January 2009 for an amount of $200 million (85% component) with a commercial facility of $43.8 million for Air India Charters, which runs international low cost carrier Air-India Express.