When it comes to Air India, there is a tonne of newsflow these days. The airline is firing up on all gears. Just yesterday, we reported about the delivery of the first Boeing 737-8 to group company Air India Express. Now, we hear about the first A350-900 of the airline.
Air India acquires their first Airbus A350-900 via Gujarat-based GIFT City lease.
Earlier this year, Air India confirmed an order for 470 jets with Airbus and Boeing. As a part of the order, Airbus will deliver six A350-900 aircraft to Air India, which were initially designated for Aeroflot, along with the original product selected. Air India will also receive 34 A350-1000 aircraft. However, those will be factory-fresh and manufactured to Air India’s specifications. Air India is the first and only customer of the A350 widebody in India.
Today, Air India announced that it has acquired its first Airbus A350-900 aircraft in the recently established GIFT City Gujarat through a finance lease transaction with HSBC by their side. Air India had recently set up AI Fleet Services Limited (AIFS), a 100% subsidiary of Air India in the GIFT City’s International Financial Service Centre. The registration of aircraft lessors in GIFT City-IFSC offers various benefits, including tax exemptions, GST and customs duty exemptions, apart from the fact that they will now be able to pay for the lease in Indian Rupees and not in US Dollars, which will reduce the fluctuations caused due to foreign exchange swings in their operations and P&L.
Nipun Aggarwal, Chief Commercial and Transformation Officer of Air India, said,
This landmark transaction marks the beginning of our aircraft leasing business from GIFT IFSC, as AIFS will be the primary Air India Group entity for widebody aircraft financing, playing a pivotal role in the future aircraft financing strategy for us and our subsidiaries. It is also a shot in the arm for the development of a robust aviation ecosystem in India. As a flag-bearer of the country, Air India is happy to support the Government of India’s efforts to develop an aircraft leasing hub in GIFT IFSC.
The first of Air India’s six Airbus A350-900 aircraft is expected to arrive in India by November or December 2023. Air India’s CEO Campbell Wilson had earlier indicated that Airbus and their suppliers are taking a little longer than expected with testing for the aircraft, so it might be a little longer than initially expected to have the aircraft delivered to them. Subsequently, it will operate domestically for the familiarisation of the crew and then eventually be scheduled for international operations.
At the moment, the acquisition is done, but the aircraft is perhaps still undergoing more testing before it will be ready for delivery to Air India in the coming weeks.
Bottomline
Air India has acquired its first A350-900 from Airbus via AI Fleet Services Limited, a company that Air India will use to buy their wide-body aircraft. This will allow AI to pay for these aircraft in Indian Rupees, not US Dollars. I’m sure there are more tax considerations to do this, and I’m making it sound oversimplified, but at the heart of it, Air India will own the aircraft via this subsidiary.
What do you think about the world of aircraft financing and financing through India?
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It’s fascinating that a gigantic conglomerate like Tata Sons or Reliance never set up an aircraft leasing compan/operation within India.
(Admittedly without knowing the full financial set-up required) It just seemed like a no brainer considering the massive explosion in the Indian Civil Aviation Fleet in the last 20 years.
Fair play to Air India for going down this route and no doubt the financial clout of the Tata’s probably assisted.
@Dev, the enabling mechanisms to provide some sort of parity to Irish Law came in just recently, so there was no way for anyone to establish this before. Only in the past couple of years has leasing through Indian entities started to take shape.