Air India seeks $1.15 bn to refinance plane purchase

Air India, which is in the process of getting additional equity of Rs 1,200 crore (Rs 12 billion) from the government soon, is seeking long term loan worth $11.5 billion to refinance the purchase of 21 new single-aisle aircraft, spares and related equipment.

The 21 aircraft, comprising nine A-319s, eight A-321s and four A-320s, have already been delivered to the national carrier by European manufacturer Airbus, airline sources said on Tuesday.

The airline would be needing Rs 3,000 crore-Rs 4,000 crore (Rs 30-40 billion) annually in the next few years to pay off its massive debt, primarily on account of aircraft induction, according to official estimates.

The monthly interest burden on this count averages at Rs 200 crore (Rs 2 billion), while the debt each month stands at about Rs 300 crore (Rs 3 billion), the sources said.

For this purpose, the national carrier might ask for another Rs 2,000 crore (Rs 20 billion) from the government in the next financial year to repay its massive debt after it gets Rs 1,200 crore (Rs 12 billion) this year, they said.

The sources said these 21 aircraft were earlier financed through rupee loans equivalent of $1.15 billion from a consortium of IDBI-led Indian banks with government guarantee.

As the rupee loan had a moratorium of two years after the final draw this April, Air India decided to refinance this loan to 'de-stress the cash flow', they said.

Air India would either furnish sovereign guarantee on the fresh loan as security or mortgage the aircraft, if necessary, they said.

In 2007, the merged airline had ordered 111 aircraft -- 43 from Airbus and 68 from Boeing which were worth a total of $11 billion.

According to official estimates, Air India is expected to incur a loss of Rs 5,656.62 crore (Rs 56.56 billion) in 2009-10.

The airline had suffered a loss of Rs 2,226.16 crore (Rs 22.26 billion) in 2007-08 which rose to Rs 5,548.26 crore (Rs 55.48 billion) the following year.

The airline has a whopping debt burden of an estimated Rs 18,000 crore (Rs 180 billion).

While the government had infused Rs 800 crore (Rs 8 billion) in the last financial year, it is planning to infuse another tranche of Rs 1,200 crore (Rs 12 billion).

Most of the second tranche, to be released after an approval of the Cabinet Committee on Economic Affairs likely in the next few weeks, would be used for settling these outstanding dues, instead of enhancing the airline's equity base.