MUMBAI: Axis Bank has become the first domestic lender to execute an aircraft financing deal for the Air India group. The transaction was carried out through its international banking unit at the Gift City for AI Fleet Services, the leasing arm and the wholly-owned subsidiary of the Tata group-owned Air India.
In a statement on Friday, Axis Bank said this marks a major breakthrough for the domestic aviation finance sector, traditionally dominated by multinational banks. The bank did not disclose the quantum of funding it has extended or the total value of the purchase by Air India. The deal involves a long-term dollar loan for the purchase of 34 training aircraft which will be deployed at Air India’s upcoming pilot training institute in Amravati, Maharashtra, the statement added.
AI's upcoming training facility is expected to become one of largest pilot-training hubs in the country.
“For the first time in the domestic banking history, all key stakeholders in the transaction—the lenders, the borrower, law firm, facility agent, and security agent are all Gift City entities,” the Bank said in the Friday statement.
Rajiv Anand, deputy managing director at Axis Bank, said, this pioneering aircraft financing deal, structured end-to-end by our Gift City unit, is a strategic step towards creating a robust aviation finance ecosystem within the country.
Sanjay Sharma, chief financial officer at Air India said, the airline has embarked on a five-year transformation journey placing an order for as many as 570 aircraft, and Gift City will be important for financing of these aircraft going forward.
In FY24, AI Fleet Services executed eight finance lease transactions worth over $1 billion while the recent transaction for 34 training aircraft was one of the first transactions where a domestic bank has been involved in a long tenor, US dollar aircraft financing, he said without disclosing the size of the financing that Axis Bank carried out.
The domestic aviation sector is projected to require around $30 billion in funding over the next decade for fleet modernisation and expansion. Historically, domestic carriers have relied on multinational banks for aircraft loans due to the lack of a strong domestic financing framework.