US Exim Bank to finance Air-India fleet expansion

The Export Import Bank of the United States has bagged the contract to finance the $7.1 billion acquisition of 68 Boeing aircraft by the state-owned international carrier Air-India. Exim Bank will finance 85% of the requirement, while the rest 15% will be done through other commercial banks. Air-India has already taken delivery of two Boeing 737 aircraft, the financing for which has been carried out through the internal resources of the company, which will eventually be refinanced. The delivery of the next three aircraft, which are expected to come this month, will also be initially financed by Air-India only. The public sector major expects to put in place a financing structure, in consultation with the ministry of finance and the ministry of civil aviation, by the end of this month or early February, so that delivery financing could be done via loan guaranteed by Exim Bank.

A delegation from India is likely to visit US soon to finalise the terms of the agreement of delivery financing. The first installment of the loan is being provided by ABN-Amro Bank, while ABN-Amro, ICICI Bank and the State Bank of India are together financing the commercial portion. These banks have also provided the pre-delivery financing which would eventually be refinanced from the delivery financing. Exim Bank has already provided the final commitment in respect of 17 aircraft and a preliminary commitment in respect of 51 aircraft to be delivered to Air India from November 2006 to December 2011. Of the 17 final commitments, 10 aircraft will be delivered to Air India Express (the fully owned low cost subsidiary of Air India) and the rest for A-I. In November 2006, the company took delivery of its first new aircraft, following the airline's December 2005 order for 68 Boeing jetliners, one of the largest commercial airplane orders in the country’s aviation history.

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