Air India could get R2,000 crore from the sale and leaseback of seven Boeing 787 it intends to purchase in 2012, a model followed by low-cost carrier IndiGo. A final decision on the purchase of the aircraft will be taken by the cabinet in January.
AI has already opened the bidding process and according to the request for proposal (RFP) document, it expects to receive deliveries of seven Boeing 787 in 2012, the first three aircraft in January, March and April, two in May and two in June. Two sources close to the development revealed that global aircraft lessors like GE Capital Aviation Services, International Lease Finance Corporation and Pegasus would be interested in the order.
?There is a strong demand for Boeing 787 in the market as the waiting period for the aircraft is almost 10 years,? one of the aircraft lessors bidding for the sale and leaseback told FE. ?It is because of the high demand that market price of the aircraft has shot up close to $ 200 million.? He did not want to be quoted as the bidding is on.
AI signed the agreement to purchase 27 of these planes in 2005 for $115 million per plane. ?The airline can afford to give a discount on the market price and still get $60 million more than what they paid for the 787,? said the lessor.
The airline would need to finance the purchase of the first two aircraft and for that it is in the process of tying up a short-term loan. ?We would need $230 million for buying the first two aircraft. However, as soon as the lessor is finalised, we will make the repayment of the bridge loan,? a senior official of AI said. The aircraft will be leased for a period of 12 years.
Sale and leaseback is a widely practiced policy amongst airlines in India and abroad.
?A bulk of profits for IndiGo comes from sale and leaseback. In fact, their operations are not entirely profitable and they post heavy profits thanks to sale and leaseback of planes,? said a consultant who did not want to be named as his firm is not allowed to comment on specific companies.
Regarding Air India, he added, that the 12-year lease period is likely to increase the lease rentals for the airline. ?Longer lease period would mean lease rental would be higher,? he said.
?They will save on keeping a maintenance reserve with the lessor but on the flip side, over the 12 years they would have to show the maintenance cost of the aircraft on their account books,? he added.
