On being asked as to how Air India will be financing the humongous order, officials said they were examining all options as the aircraft assets acquired will have an operational lifecycle of 15-25 years 
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On being asked as to how Air India will be financing the humongous order, officials said they were examining all options as the aircraft assets acquired will have an operational lifecycle of 15-25 years Air India's mega deal for passenger aircraft with Airbus, Boeing will result in the national carrier offering one of the world’s youngest fleet with improved amenities for Indian travellers would happen in three phases. And the exercise is all set to commence later this year.
Ending months of speculation and intense bargaining, Air India formally announced an order for 470 narrow and wide body aircraft from Airbus and Boeing on Tuesday. The size of the deal would expand considerably if Air India decides to exercise the option of acquiring another 370 aircraft from the world’s leading plane makers, taking the total size of the order to a whopping 840 aircraft.
“The first is short-term, which will happen this year and the first half of next year, which is about largely bringing in leased aircraft. We have 36 aircraft on lease, 30 of which are going to be widebodies. And they give us an immediate capacity boost. But in the case of widebodies, they also come [fitted] with a new product,” Air India sources told Business Today.
From mid-2024-25, the carrier is expected to spend nearly $300 million in refitting its entire widebody fleet of Airbus and Boeing aircraft. That will include a new seat in every class and in-flight entertainment.
Thereafter, deliveries of the new orders would start in 2025. “Those [aircraft] will come with a completely new product and by mid-2025, every aircraft in the Air India fleet will either be retrofitted to modern standards or will be delivered with modern standard products,” said officials.
The deal’s ticket size has been estimated at $110 billion. However, declining to comment on speculation, officials confirmed they had negotiated hard with plane makers Airbus and Boeing to get the best bargain on the world’s largest aircraft deal by far.
On being asked as to how the carrier will be financing the humongous order, officials said they were examining all options as the aircraft assets acquired will have an operational lifecycle of 15-25 years.
“We have a long time available to return the capital on investment. Secondly, this opportunity for financing goes beyond equity. Aircraft acquisition, for example, is a very liquid market. We will be looking at all opportunities to fund these aircraft,” they said.
All financing options open
Meanwhile, aviation experts told Business Today the order may be financed through a combination of mechanisms such as sale-and-leaseback (SLB), finance leasing and outright purchase as the order pans out over ten years, with accelerated aircraft induction expected in the initial years.
“This will entail pre-delivery and the final acquisition financing. We estimate that a majority of the narrowbody fleet will be financed via the SLB mechanism, while the wide-body fleet will involve finance leases or an outright purchase,” Satyendra Pandey, managing partner at aviation advisory AT-TV, told BT.
“These can involve a combination of bank financing, EXIM and ECGD financing and maybe even bond issuances,” he added.
Another expert requesting anonymity said this may be done through a combination of internal accruals, debt and equity.
Singapore Airlines has already agreed to invest $250 million as part of the transaction to merge the joint venture company into Air India. Besides, the parent company Tata Sons’ backing is expected to help with a strong credit rating to obtain a competitive rate on financing.
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