By Santanu Choudhury
NEW DELHI--Air India Ltd. is seeking a bridge loan of up to $500
million to buy five Boeing Co. (BA) 787 Dreamliner planes, a senior
Air India executive said Thursday.
The airline has asked banks and other financial institutions to
submit offers for the loan by July 5, the executive told The Wall
Street Journal by telephone.
Air India was one of Boeing's first Dreamliner customers when it
ordered 27 in January 2006, though production problems delayed
delivery. It has received seven since September, the bridge loans
for which were from Standard Chartered Bank and Boeing's aircraft
leasing and financing unit Boeing Capital Corp., said the
executive, who declined to be named.
Safety concerns after battery malfunctions on the Dreamliners of
two Japanese carriers in January grounded the fleet and delayed the
delivery of more.
The U.S. Federal Aviation Administration certified an improved
battery design in April, and Air India resumed flights in May.
The new loan will be for six months to a year, and the five
planes will arrive in July-December, the executive said.
A bridge loan is typically used to meet payment commitments
until longer-term financing is arranged.
Air India plans to sell the five planes to leasing companies,
and lease them back, the executive said. It will use the proceeds
to repay the loan.
Airlines sometimes sell planes at a premium to leasing
companies, and lease them back on a monthly basis. The practice is
widely considered an effective method of freeing up capital.
The Dreamliner is fuel efficient and therefore cheaper to
operate than many other wide-body aircraft. A Dreamliner fleet is
central to Air India's return to profitability, having recorded
losses for five years because of high fuel and interest costs as
well as competition from budget airlines.
The loan won't have a federal guarantee, so Air India will offer
the planes or an equivalent as security, the executive said.
Write to Santanu Choudhury at santanu.choudhury@dowjones.com
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