IA, ICICI Bank ink $152 mn funding pact

AVIATION INDUSTRY SPREADS WINGS WIDE

Indian Airlines (IA) has signed a memorandum of understanding (MoU) with ICICI Bank for pre-delivery payments (PDPs) funding for acquisition of aircraft from European aircraft manufacturer Airbus Industrie.

The funding arrangement for PDP would be a syndicated external commercial borrowing (ECB) of $152 million, with ICICI Bank as a sole arranger and underwriter, and would be spread over from June 2006 to January 2010.

ICICI Bank has also agreed to assist Indian Airlines in applying to European Credit Agencies (ECA) for tie-ups to get long term funds.

ICICI Bank was shortlisted in a competitive bidding process. The pact was inked by Vishwapati Trivedi, chairman & managing director, Indian Airlines and Kalpana Morparia, joint managing director, ICICI Bank, Mumbai.

Significantly, the airline got this funding without any guarantee from the government and it would get long-term funds from ECA's support to complete the acquisition.

Earlier, Indian Airlines had signed an agreement with Airbus Industrie for the purchase of 43 Airbus A320 family aircraft - comprising 19 A319, 4 A320 and 20 A321 - at an estimated $2 billion. The first aircraft is scheduled to arrive in October 2006 and the entire delivery is expected to be completed by March 2010. All 43 aircraft will feature two-class cabin layouts and will be powered by CFM engines.

This acquisition would allow Indian Airlines to step up growth, expand its market and further improve the quality of its product besides replacing some of its existing Boeing 737 and Airbus A300 aircraft. Indian Airlines becomes the first carrier to select the Airbus A321 aircraft, which will have a capacity of 171 seats.