Air India is planning to switch from sale and lease back to acquisition
model for Boeing 787 and 777 aircraft citing higher operating expenses
and redelivery costs.
The move comes in the backdrop of operating losses in two consecutive quarters in FY 2017, largely blamed on increase in lease rentals. Air India suffered an operating loss of Rs 460 crore in the July-September period, after another Rs 246-crore loss in the financial year's first quarter, April-June.
Air India has 27 Boeing 787s on order and has already inducted 23 aircraft. Twenty-one of them are on lease following sale-lease back transaction.
The airline is planning a debt-funded acquisition for remaining aircraft (including two in service) which it will acquire till August 2017. Similarly, Air India plans to acquire 3 Boeing 777 aircraft in 2018 raising debt instead of sale-lease model.
Recently the airline management made a presentation to the civil aviation and finance ministries seeking their approval to raise loans and switch to acquisition route. Air India is seeking a 25-year loan from the Life Insurance Corporation with five years moratorium of principle payment to fund the aircraft.
"We feel outright purchase of aircraft is more economical option than leasing. The burden of leasing cost remains in the books for a long time," Air India chairperson Ashwani Lohani told Business Standard.
To Read the News in Full 11/01/17 Aneesh Phadnis & Arindam Majumder/Business Standard
The move comes in the backdrop of operating losses in two consecutive quarters in FY 2017, largely blamed on increase in lease rentals. Air India suffered an operating loss of Rs 460 crore in the July-September period, after another Rs 246-crore loss in the financial year's first quarter, April-June.
Air India has 27 Boeing 787s on order and has already inducted 23 aircraft. Twenty-one of them are on lease following sale-lease back transaction.
The airline is planning a debt-funded acquisition for remaining aircraft (including two in service) which it will acquire till August 2017. Similarly, Air India plans to acquire 3 Boeing 777 aircraft in 2018 raising debt instead of sale-lease model.
Recently the airline management made a presentation to the civil aviation and finance ministries seeking their approval to raise loans and switch to acquisition route. Air India is seeking a 25-year loan from the Life Insurance Corporation with five years moratorium of principle payment to fund the aircraft.
"We feel outright purchase of aircraft is more economical option than leasing. The burden of leasing cost remains in the books for a long time," Air India chairperson Ashwani Lohani told Business Standard.
To Read the News in Full 11/01/17 Aneesh Phadnis & Arindam Majumder/Business Standard
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