AI plans lease-buyback model to clean up books

New Delhi: In an attempt to clean up its balance sheet, Air India plans to sell some of its new aircraft to a separate company and then lease them back, in line with a practice followed by several private carriers.
The state-run airline expects to end 2008-09 with a cumulative loss of Rs 7,200 crore, according to a statement by civil aviation minister Praful Patel in Parliament on Wednesday. The company is yet to finalise its balance sheet for the year. Its stand-alone losses last fiscal were around Rs 5,000 crore.
The sale and leaseback strategy will free up capital to help the beleaguered airline turn around in a difficult aviation market. Globally, the combined losses of all airlines exceeded $9 billion, according to the International Air Transport Association.
“We will get into sale and leaseback of planes eventually. That is the model private carriers are following. It will help in taking capital costs out of the company’s books. Of course, lease rentals will have to be paid,” Patel said in an exclusive interview with FE on Wednesday.
Simultaneously, the airline’s equity will also have to be raised to around Rs 2,500 crore from the current base of Rs 145 crore. According to Patel, bailout estimates of Rs 10,000-15,000 crore were unfounded. “There are a lot of projections, but I am confident that is not the kind of money required.”
16/07/09 Sunny Verma/Fiancial Express

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Categories: Foreign Jul 2009, NACIL Jul 2009