Air India (AI, Delhi International) has refinanced short-term loans from the State Bank of India and the Bank of Baroda, according to the Economic Times newspaper.
The refinancing occurred in the last quarter of 2023, with the airline securing INR190 billion rupees (USD2.29 billion) over a three-year term at 7.5% per annum. The loan replaces a previous INR180 billion (USD2.17 billion) bridging loan from the two banks.
INR133 billion (USD1.6 billion) of the new financing comes from the State Bank of India and INR57 billion (USD690 million) from the Bank of Baroda, the newspaper reported citing people familiar with the details. Tata Sons-owned Air India will use the funds to meet working capital needs.
"Air India finally chose to go along with the existing banks, which are among the largest in the country," a source told the daily. "The loan is linked to short-term government treasury bills with a reset clause every year. There are very few banks which can price the loan at such a thin margin. But the Tatas are a AAA marquee client, and both banks didn't want to cede any of the loans to competition."
Currently, six-month Indian government treasury bills pay about 7.1%, while three-month bills pay about 6.9%. The source said Air India used funding from local banks to maintain day-to-day operations and relied on international financial institutions to help with aircraft acquisitions. In December 2023, the airline tapped Japan's Sumitomo Mitsui Banking Corporation (SMBC) for USD120 million to meet aircraft payments due, and in September, relied on HSBC Bank to finalise the purchase of its first A350-900.
According to ch-aviation fleets data, Air India has 124 A320-200Ns, 140 A321-200Ns, nine A321-200NX, one A321-200NX(LR), twenty A350-1000s, and fourteen A350-900s on order at Airbus, plus fifty B737-10s, eighty-three B737-8s, five B777-300ERs, ten B777-9s, and twenty-five B787-9s on order at Boeing.
