Mumbai: Air India Ltd. plans to raise in the next few months a short-term loan of about USD 500 million to purchase four Boeing 787 Dreamliner planes, a senior executive said, as the national carrier steps up pace to expand its international operations.
The airline will "call for proposals from banks for the bridge financing" soon, the executive said. . He didn't give any details.
A bridge loan is typically used to meet payment commitments in the near term until longer-term financing is arranged.
Air India expects to take delivery of six Dreamliner planes this financial year through March 2013, the first of which is likely to arrive by June. It has already tied up with Standard Chartered Bank to raise a similar loan of USD 195 million for the first two planes.
The airline ordered 27 Dreamliner planes from Boeing Co. in 2005. It was part of a USD 15 billion 111-plane contract placed to the US manufacturer and Airbus.
Air India is accelerating its fundraising plans after the Indian government last week approved a financial and operational plan to turn around the loss-making airline.
Air India has posted losses for the past five years, due partly to high fuel and interest costs. It also has the problems of an inflated workforce and mandatory flying to some unprofitable routes.
The turnaround plan includes taking delivery of all the Dreamliner planes, government financial assistance worth INR300 billion (USD 5.8 billion), conversion of Rs 110 billion working-capital loans into long-term debt and issuing Rs 74 billion worth of government-backed non-convertible debentures.
The executive said that Air India will "start work" from May 1 on issuing the bonds.
He also said that Air India has sought proposals from banks to raise up to USD 1 billion in offshore loans and that it will seek approval from the central bank after getting responses from the lenders.
The government, in its budget last month for the fiscal year that began April 1, said it will let airlines raise up to USD 1 billion in overseas loans for their working-capital needs. Airlines were earlier allowed such borrowings only for their plane purchases.
First Published: Wednesday, April 18, 2012, 10:24