Air India acquires its first Airbus A350-900 via finance lease through GIFT IFSC

“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,” Air India’s Chief Commercial and Transformation Officer Nipun Aggarwal said.

The government wants India to emerge as a hub for aircraft leasing and the GIFT IFSC is seen as the potential centre for this business in India. Indian carriers have mostly leased aircraft from traditional hubs like Ireland, Singapore, and Hong Kong.

Over the past few months, both the Air India group and IndiGo have set up leasing units in GIFT City. Both these airline groups are seen as key to developing the aircraft leasing ecosystem in India, given their recent massive aircraft orders.

“Govt. of India has taken several initiatives to develop the aircraft leasing ecosystem at IFSC in India. IFSCA (IFSC Authority) has been working with the stakeholders to develop regulatory enablers for aircraft leasing and financing. The steps taken by Air India by establishing a finance company for the purpose of aircraft leasing and financing at IFSC will go a long way in developing IFSC as a preferred destination for aircraft leasing and financing in India as well as globally,” IFSCA Executive Director Dipesh Shah said.

In a finance lease, typically the lessor (AIFS in this case) purchases the aircraft selected by the airline (Air India in this case), and leases it to the carrier for the long term. It usually has the option to transfer the aircraft’s ownership to the lessee at the end of the lease period. On the other hand, in an operating lease, the lease period is relatively shorter usually and the lessor retains the control of the aircraft at the end of the lease period.

Leasing aircraft by airlines is an alternative to them directly owning the planes. Leasing allows airlines to expand their fleets without incurring significant capital expenditure. Apart from helping airlines protect liquidity, aircraft leasing also allows them to operate on an asset-light model and helps keep debt levels in check.

The first of Air India’s six Airbus A350-900 is expected to arrive in India by the end of this year, with the remaining aircraft scheduled for deliveries through March 2024. In addition to the six Airbus A350-900 aircraft, Air India’s firm orders for 470 new aircraft include 34 A350-1000, 20 Boeing 787 Dreamliners, 10 Boeing 777X widebody aircraft, as well as 140 Airbus A320neo, 70 Airbus A321neo and 190 Boeing 737MAX narrowbody aircraft.