AI in sale-and-lease deal with Europe bank

For the first time in its history, state-run carrier Air-India will sell its six Airbus A310-300 aircraft to a European bank and lease them back to its fleet for operations, in a sale-and-lease back deal. This is a first of its kind for the state-owned company.

Sale-and-lease back deals have been generally executed by private carriers to provide for cash upfront to meet their working capital requirements.

Sources close to the development said leading UK-based aircraft funding bank Investec has proposed to purchase six A310-300 aircraft for nearly $80 million (nearly Rs 350 crore or Rs 3.5 billion) and lease them back for a rental of $2,47,000 each a month over 60 months.

The cost of the aircraft in the books of Air-India is nil due to depreciation.

Air-India Executive Director (Finance) S Venkat confirmed the development but declined to divulge further details.

"Sale-and–lease back is an attractive proposition for Air-India

as we are looking for innovative financing modes to fund our mega acquisition programme. Under this mode, we can fly these aircraft and maintain them according to our standards," he said.

Venkat further added, "We are planning to convert two or three aircraft to freighters, where we can derive maximum economic value. With this, we will unlock the complete value of these older aircraft."

Sources said the sale-and-lease back could be extended to five more years on mutually agreed terms. This would be in addition to the current duration of three to five years.;

"This mode of financing will give Air-India cash upfront, that can be used for its working capital requirements.

"The carrier is also contemplating borrowing from the market for funding expansions," sources added. 

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