Tata Group-controlled Air India has taken a loan of $120 million from Japanese lender SMBC to purchase a wide-body aircraft from Airbus. The transaction has partly financed Air India’s purchase of an A350-900 aircraft from Airbus, which was delivered in October 2023.
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In a statement, SMBC said the loan is a secured debt facility through its Singapore branch, while Air India’s GIFT City-headquartered arm AI Fleet Services is the borrower.
The purchase is part of the mega announcement by the Tatas to buy a total of 470 aircraft from Boeing and Airbus, and AI has also contributed equity. An Airbus A350-900 aircraft is priced above $300 million.
“SMBC Group is pleased to expand upon its long-established relationship with Tata Group through this deal,” SMBC country head for India Hiroyuki Mesaki said.
He added that this is the bank’s first-of-its-kind transaction for aircraft finance lease.
Tata Group took control of Air India in January 2022 had placed orders for 470 aircraft from Airbus and Boeing at $70 billion earlier this year.
The order for Boeing has 190 B737 MAXes, 20 B787s, and 10 B777s aircraft. The Airbus order comprises 210 A320 family and 40 A350 planes. A350, B777, and B787 are wide-body aircraft that have bigger fuel tanks
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Nipun Aggarwal, Air India’s chief commercial and transformation officer, said the aircraft was among the first deliveries in the company’s large aircraft order announced earlier this year.
“This transaction is also a major step in expanding our aircraft financing business through GIFT City, India’s first International Financial Services Centre (IFSC),” Aggarwal added.
The SMBC statement said India is the fifth largest aviation market globally, and the sector is expected to continue growing significantly on tailwinds like the emergence of a large and growing middle class willing to travel.
Earlier, Air India secured funds worth Rs 14,000 crore from State Bank of India and Bank of Baroda through a mix of fresh loans and refinance of existing debt. The fundraising comprised Rs 12,500 crore to refinance loans and Rs 1,500 crore obtained through the pandemic-era Emergency Credit Line Guarantee Scheme (ECLGS), media reports said.
Besides, it was reported that Air India was in talks with multiple commercial banks for a Rs 3,000-crore loan, which it is seeking to make down payments to lessors under sale-and-leaseback (SLB) agreements.
Tata Sons had acquired a 100 per cent stake in loss-making Air India on January 27, 2022, through its fully owned subsidiary, Talace Private Limited.
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Later, it announced that Air India and Vistara will be merged into one entity, which is estimated to be completed by March 2024. Singapore Airlines will have a 25 per cent stake in the newly merged entity.
Apart from this, Air India Express and Air Asia India will also be merged to create a single low-cost carrier airline.
