For the first time, Indian banks have started evincing interest in financing aircraft purchase, with state-run Bank of India (BoI) extending a loan of $200 million to Air India to finance the acquisition of three Dreamliners, official sources said on Sunday.
The national carrier would use the amount to acquire these Boeing 787s before offering them to leasing companies for sale and leaseback arrangement, under which one sells an asset and leases it back, thereby continuing to use the asset but no longer owning it.
BoI has given a stand-alone loan of $200 million for three of these airplanes, the sources said, adding that BoI and the State Bank of India have earlier taken a share of financing aircraft purchase.
The airline plans to raise $500 million in this financial year through bridge loans to finance five Dreamliners.
Air India has also received a credit of $288 million from Standard and Chartered Bank to pay off the bills for the fuel its planes pick abroad, besides purchase of simulators and spare parts, they said. Almost 70% of an airline's costs are dollar- related since most of the acquisition is carried out from foreign suppliers.