AI to get USD 1.3 billion loan guarantees from American bank

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Ahead of a GoM meeting to finalise Air India's financial restructuring plan, the US Exim Bank has decided to give loan guarantees of USD 1.3 billion to support the airline's fleet acquisition from aerospace company Boeing.

A decision to this effect was taken last week in Washington by the Board of Directors of the Export-Import Bank of the US.

The bank approved USD 1.3 billion in loan guarantees supporting Boeing commercial aircraft sales to Air India, a statement said after the Board meeting.

In addition to these final commitments, the Board also approved a USD 2.1 billion preliminary commitment to support future deliveries of Boeing aircraft to Air India, it said.

"Upon approval of the conversion of the preliminary commitment into a final commitment, the transactions in total will support the export of 30 Boeing aircraft to the state- owned, national flag carrier of India," it added.

Air India has pending orders for 27 Boeing 787 Dreamliners, the deliveries of which are expected to begin in the next two months.

These are part of the 68-aircraft order placed by the national carrier with the US plane manufacturer. This support would enable Air India to raise finances for acquiring latest technology aircraft at competitive interest rates compared to commercial financing, official sources said.

The Group of Ministers (GoM), at its next meeting later this month, is likely to take a final call on the acquisition of these planes whose deliveries have been delayed by almost three years due to various factors, including strikes by Boeing workers.

As a reparation, Boeing has agreed to a compensation worth nearly USD 500 million to Air India and the matter is still being discussed, according to the latest report of the Comptroller and Auditor General.

The Exim-Bank and National Aviation Company of India Limited (NACIL), Air India's parent company, had signed an agreement worth USD 1.1 billion in January 2010 to support the financing of sale of Boeing planes to the Indian carrier.

At a recent meeting, the Air India Board had decided to go ahead with the acquisition of Boeing 787s as part of a fleet acquisition programme till 2020 and would be seeking government nod for it, official sources said here.

The Board had then reviewed a modified turnaround plan prepared by SBI Caps which suggested 'a scenario for expansion' of Air India that included further fleet acquisition to meet the demands of growth of the Indian aviation market.

A strong case for the acquisition of the Dreamliner as per the original 2005 order for 27 of these planes was made at this Board meeting. The list price of a Boeing 787-8 last year was USD 185.2 million.