Air India to raise Rs7,350 cr from Dreamliner sales to erase part of its Rs20,000-cr debt

India's state carrier Air India expects to raise around Rs2,100 crore by selling five of its Boeing 777-200 long Range Dreamliner jets to Abu Dhabi-based Etihad Airways and another $840 million (about Rs5,250 crore) by way of a sale-cum-leaseback arrangement for its Boeing 787-8s, thereby raising a total of over Rs7,350 crore. This would enable the airline to repay part of its Rs20,000-crore debt.

Air India, which is currently in the process of carrying out the sale of its five Boeing 777-200 Dreamliner aircraft to Etihad, hopes to raise $336.5 million when the ownership of the aircraft would be transferred to Etihad by April, official sources said.

The ailing national carrier expects to use the proceeds of the sale to pay off loans incurred in the acquisition of these aircraft and working capital needs.

The Cabinet Committee on Economic Affairs in November last year, approved the sale of the Boeing 777 aircraft to Etihad soon after the Gulf carrier received regulatory approvals to pick up 24 per cent stake in Jet Airways.

Etihad plans to use these five aircraft to launch non-stop flights between Abu Dhabi and Los Angeles from June.

Air India had acquired the Boeing 777 aircraft as part of the 68 aircraft it bought from the US manufacturer in 2006 in a deal worth Rs 35,000 crore. These planes are now being sold on grounds of being fuel-guzzlers.

Air India hopes to replace these with the more fuel-efficient Dreamliners on the long-haul sectors.

According to Air India officials, the decision to sell these planes was taken after other options like leasing, re-configuring them or deploying them on short-haul routes were found unviable.

Air India also expects to raise as much as $840 million (a little over Rs5,000 crore) by way of sale of its seven Boeing 787-8 Dreamliner planes and leasing them back. These funds could be used to pay off bridge loans taken against these aircraft, official sources said.

For four of the first seven of the Dreamliners it received, Air India has mandated a leaseback arrangement with Investec Bank and for  the other three with Deutsche Bank. The airline, which has 11 Boeing 787s, would get six more this year.

Under the sale-cum-leaseback an owner sells an asset to a leasing firm and leases it back, so that it continues to be able to use the asset on a long-term basis, paying tax-deductible lease rentals, but no longer owns it. The leasor earns lease income and claims depreciation in its books for the aircraft leased by it.

The leaseback facility is frequently employed by most global airlines to reduce their debt.