State-owned carrier Air India has reduced its aircraft-related loans by `6,000 crore, which now stand at `14,000 crore against `20,000 crore at the end of FY16. Airline officials told FE that the airline paid back `6,000 crore of bridge loans recently from the proceeds of sale and lease-back of its nine Dreamliner aircraft, which was conducted at the end of August.
This is the first sale and lease back transaction of Air India without the guarantee of US Export and Import Bank.
The transaction was carried with the guarantee from the government of India and attracted an internal rate of return below 3% due to the improving financials of the company.
The participants in the transaction were Deutsche Bank, Bank of India, Export Import Bank of India and Industrial and Commercial Bank of China (ICBC). “We are happy that this was the first transaction of Air India with the participation of the EXIM bank of India and without the presence of the EXIM bank of United States. Our aircraft related debt will come down but the aircraft rentals will increase as a result of the sale and lease back,” a senior AI official said.
In an another major development, around 10 days back AI conducted the sale and lease back of two more of it Dreamliner for `22.5 crore which was mandated by the First Gulf Bank. This was for the first time that an investment bank from the Gulf region financed the purchase of the aircraft. FE had first reported in July about AI’s plan to reduce its debt by the sale and lease back of its Dreamliner aircraft.
Air India reported an operating profit of `108 crore for the first time in FY16 after its merger with Indian Airlines. According to sources the audited results will be approved by its board of directors at a meeting next week.
During the April-June quarter, Air India reported a passenger growth of 11.5% to 9.575 million. The passenger load factor increased to 81.4% from 78.7% with a capacity increase of 7.3% on account of better utilisation.
The airline has approached the government to convert `10,500 crore worth of long term debt into non-convertible debentures. The management is expected to complete the process within the current fiscal.
Air India has R4,500 crore of interest liability every year. As a result of the conversion of the long term debt in to non-convertible debentures, the airline can save 2%-2.5% of the interest cost. The Union government has so far pumped in more than R22,000 crore in Air India in the past three years out of the R30,000 crore turnaround plan approved by it. According to the data available with DGCA, the national carrier had a market share of 14.6% in August 2016.