Nacil sells and leases back aircraft in order to raise loans

New Delhi: With the sub-prime crisis leaving international financial markets in a turmoil, Air India's parent company, the National Aviation Company of India Limited (Nacil), has altered its borrowing plans. Instead of a plain vanilla borrowing, Nacil has opted for a deal through which it has disposed of eight aircraft, worth around $335 million, through the sale of three Boeing 747s and five Airbus A-320s from its fleet.

These aircraft will then be leased back by the national air carrier for a period of 7 to 9 years.

Rising international rates, with the best offer coming in 600 points above Libor, have aborted the foreign route to raise loans as government rules permit foreign borrowings only in the range of 250 bps above Libor.

The dollar is the currency used for all transactions, be they for aviation turbine fuel, pre-delivery payments or payment of interest and the ongoing sub-prime crisis has led to a shortage in the availability of the currency, airline officials said.

While the  A-320s were sold for $25 million each, the 747s were sold for between $65 and 70 million depending on the age of the aircraft, officials said.

Officials stressed that the deal would not impact the bottom line in any way as the aircraft were all around 12 to 13 years old, and after seven years of lease they will become too old for commercial operations.