ORIX Aviation closes first lessor JOLCO with Avolon
12th April 2023
Air India has disclosed at an industry event this week that it is currently unable to raise financing for its aircraft deliveries on its own due to its weak balance sheet. One option open to AI and its Indian rivals is external commercial borrowing or ECBs, which Jet Airways has already disclosed it is eager to raise $300m of ECBs.
Under the ECB scheme for airlines, each company can raise up to $300 million for working capital as well as refinancing of outstanding working capital rupee loans.
During its third quarter result call, chief financial officer and acting chief executive officer Ravishankar Gopalakrishnan confirmed that the carrier had already received approval from the Reserve Bank of India to raise $150 million via ECBs as well as a “sanction letter from one of the West Asian banks to raise another $150 million”. Through ECBs Jet can borrow at near interest free rates and replace its rupee debt saving $30m in interest costs.
Air India has yet to move to raise funds via ECBs but has indicated its interest in doing so but management are keeping a keen eye on rupee exchange rates because if it depreciates, the amount of upside gained via the cheaper interest rates could be negated. However if the rupee appreciates, airlines could save 1-2% in interest costs.
SpiceJet and IndiGo have not made any public statement that they are considering ECBs.