Air India in talks with LIC for ₹10,000-cr loan for aircraft purchase

Air India is in talks with Life Insurance Corporation of India for a loan of up to ₹10,000 crore to help finance the acquisition of 6 Boeing 787 and three 777 aircraft.

The nine aircraft, which are to be delivered in 2016-17 and 2017-18, are a part of the 68 Boeing aircraft order which the airline had placed in 2005. The proposal was discussed at a meeting that Air India Chairman and Managing Director Ashwani Lohani had with the LIC Chairman recently.




Air India will approach the Cabinet to gets its approval for the outright purchase of these nine aircraft instead of going in for a sale and lease back (SLB) arrangement as it had done when it signed an agreement for the purchase of 68 Boeing aircraft in 2005.

LIC is keen that Air India own these aircraft so that the loan can be extended.

Further, in case of a loan default, LIC can take over the aircraft instead of a leasing company which would be the case if Air India follows the SLB route.

Air India is taking up the matter with the Ministry of Civil Aviation pointing out to the advantages of going with LIC for acquiring the nine Boeing aircraft under a rupee loan.

“The repayment tenure for the LIC loan will be about 20 years which is longer than the 12-year repayment schedule for the earlier US Exim loan for acquiring aircraft. Besides, this will be a rupee loan so the airline will not be hit by exchange rate fluctuations and the rate of interest will be predetermined and will not be affected by any increase in the London Inter Bank Offered Rate (LIBOR) which was the case in the Exim loan,” a senior Air India official said.

The state-owned airline could also get a “moratorium” on the principal for the first few years of the loan which will allow it to pay only the interest during the first few years.

Incidentally, this is not the first time that a state-owned airline is going in for a rupee loan to finance acquisition of aircraft.

The erstwhile Indian Airlines had gone in for a rupee loan to finance its 43 Airbus aircraft deal about a decade ago.

It is also understood that LIC has had a similar arrangement with the Indian Railways to finance purchase of coaches.(News Courtesy : thehindubusinessline)

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