Air India is planning to restructure its finances and revamp its operations as a part of its strategic expansion plan. According to the sources, TATA Group-led Air India is planning a cash infusion of $4 billion to lease new aircraft, expand operations, and clear previous debt.
Although there is no official statement by the airline or Tata Group, sources close to the airline have confirmed that the money will be used to revamp the airline and clear some of the pending debts of Air India.
Going ahead the airline is planning to lease 30 new aircraft including 5 widebody Boeing and 25 Airbus narrowbody planes over the next 15 months. The new fleet will used for expanding India-US routes. The new aircraft, which will enter service in late 2022, will increase the airline's fleet by over 25 percent.
Air India CEO and Managing Director Campbell Wilson said: "After a long time without significant growth, Air India is delighted to resume expanding its fleet and global footprint. These new aircraft, together with existing aircraft being returned to service, address an immediate need for more capacity and connectivity, and mark a strong step forward."
One of the major challenges plaguing Air India is the drop in its market share over the last decade. During privatisation, Air India’s domestic market share stood at 11.6% whereas at present it is less than 10%, raising some major concerns. Taking the challenge head-on Tata is trying to accelerate the airline growth volumes by adding a new and advanced fleet, adding newer and more economically viable routes, digitising the process, and enhancing the overall customer experience.
The Tatas are likely to use their relationships with banks for debt refinancing. Soon they will hire investment advisors as informal discussions with a few foreign lenders and some private equity funds are already underway.
Sources claim that the debt refinancing portion will be relatively easy as lenders within Tata’s existing banking relationships will step in. The equity component of the transaction may take a bit longer given that globally, the number of private equity funds that invest in the airline business is relatively few.
The new CEO, Campbell Wilson, is putting in extra effort to improve the airline’s on-time performance. All the relevant departments report directly to him as a part of changing airline working policy.
With a massive order of over 200 aircraft on the cards, it will be some months before the airline’s financial charts are back in the green. With the additional fundraiser, the Tatas seem to be covering their ground for a strategic expansion. Till then, it is just a matter of patience for the ambitious Air India.