Air India’s new plan to use its aircraft to raise $856 million; here’s how it will do it

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Published: November 20, 2018 11:28:42 AM

Under the SLB pact, the airline plans to sell the planes to the lessor and lease the same aircraft immediately back under an operating lease for a period of up to 12 years, with an option to extend the same by another three years.

air india, air india boeing dreamliners, air india dreamliners purchasing, air india expansion plan, boeing dreamliner air indiaAir India has set a reserve price of USD 105 million and USD 123 million for Dreamliners. (Reuters)

Cash-strapped Air India is planning to raise as much as $856 million through the sale and leaseback of seven of its Boeing aircraft over the next 15 days, as it looks to repay the short-term loans raised to fund the acquisition of widebody aircraft. The fund to be raised is also expected to help the airline to meet its immediate liquidity requirements.

The loss-making national airline, which has been in losses for a long time now, has floated tender for the sale and leaseback of six Boeing 787 (Dreamliner) and one Boeing 777 aircraft, which were delivered to it between November 2016 and March 2018, according to a tender posted by the airline on its website.

SLB (sale & leaseback) lets the owner of an aircraft to sell the asset and then take it back on lease from the leasing firm, allowing the owner to remove the aircraft and debt associated with it from the balance sheet.

Now, under the SLB pact, the airline plans to sell the planes to the lessor and lease the same aircraft immediately back under an operating lease for a period of up to 12 years, with an option to extend the same by another three years.

Air India has set a reserve price of $105 million and $123 million for Dreamliners and a reserve price of $157 million for the 777-300ER. While for Boeing, the 787-8 aircraft has an average list price of $239 million, it has set a price of $361.5 million for 777-300ER. The reserve price has been set based on the age of these aircraft.

Air India, which holds a debt burden of Rs 55,000 crore, apart from huge accumulated losses, is staying afloat on a bailout package issued by the last UPA government in 2012. The government is finding ways to infuse more funds into the carrier.

Meanwhile, The Indian Express reported citing a senior airline official that Air India is looking to raise Rs 700-800 crore through the sale of more than 70 residential and commercial properties across the country. The fresh bid to sell properties is a part of the cash-strapped airline ‘s real estate assets monetisation plan, which was approved in 2012.

The properties will be e-auctioned through the state-run auctioneer MSTC. As part of the plan, the airline set an annual target of Rs 500 crore from 2013 onwards to raise capital to the tune of Rs 5,000 crore between the period of April 2014 and March 2021.

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