AIG bailout likely to impact Indian aviation

Bangalore: The financial bailout of the world’s largest insurer the American Insurance Group (AIG) is expected to have its reverberations on the Indian civil aviation sector.
International Lease Financing Corporation (ILFC), AIG’s subsidiary, is currently among the world’s largest aircraft lessors. AIG’s customers include domestic aviation companies, Jet Airways, Kingfisher Airlines, Deccan Aviation and Spice Jet.
Almost the entire fleet of the private civil aviation sector is lease financed. Currently, there are about 370 aircraft in the country, of which about 35 per cent are new. Some of the leases, especially for new aircraft, were structured as cross-border sale and leasebacks, industry sources said. In this kind of structure, aviation companies purchase aircraft, sell it to a finance company and lease them back, paying fixed lease rentals at regular intervals. Such cross-border lessors are to taking advantage of double taxation treaties.
Sources said in most private sector aviation companies, deals were structured as leveraged leases. Leveraged leases imply that lease financiers, such as ILFC, raise debt for funding the assets. Each of these leases is structured through a separate special purpose vehicles (SPV), the sources said, with equity participation by both the counter parties involved.
18/09/08 C. Shivkumar/Business Line

To Read the News in full at Source, Click the Headline

Categories: Indian Aviation- In General Sep 2008