Air India borrows $120 mn from Japanese lender SMBC to buy Airbus plane

Tata group-owned Air India has borrowed $120 million to buy a wide-body aircraft from Airbus, Japanese lender Sumitomo Mitsui Banking Corp. (SMBC) said.

The airline secured a debt facility through SMBC’s Singapore branch to fund the purchase of an A350-900 aircraft, which was delivered in October.

The A350-900 can accommodate up to 350 passengers in a three-class configuration, and fly non-stop for up to 18,000km, or about 20 hours, according to Airbus.

SMBC was the sole bank involved in the transaction, with AI Fleet Services Ltd, Air India’s wholly owned subsidiary in Gujarat International Finance Tec-City (GIFT City), being the borrower.

In June, Air India had signed purchase agreements for 470 aircraft from Boeing and Airbus at the Paris Air Show in a deal valued at about $70 billion, based on list prices.

The current transaction is part of Air India’s larger order, SMBC said in a statement, while pointing out that the deal was its first ever aircraft finance lease.

“The deal contributes to SMBC’s strong credentials globally in the aviation transportation business. SMBC Group is pleased to expand upon its long-established relationship with Tata group through this deal. Through an innovative GIFT City structure, we have successfully completed this aircraft secured debt facility, marking the bank’s first aircraft finance lease transaction of its kind,” Hiroyuki Mesaki, head of SMBC India, said in the statement.

Nipun Aggarwal, chief commercial and transformation officer at Air India, said, “We are pleased to partner with SMBC in this financing of an A350-900 aircraft, which is among the first deliveries of our large aircraft order. This transaction is also a major step in expanding our aircraft financing business through GIFT City.”

India is the fifth largest aviation market. Significant growth in the sector is expected to continue, as evidenced by the large orders placed across the Indian aviation industry to meet growing demand. SMBC said the Air India deal will help it grow in the fast-growing aviation market.

Headquartered in Tokyo, Sumitomo Mitsui Banking Corporation (SMBC) is a leading global financial institution and a core member of Sumitomo Mitsui Financial Group (SMBC Group).

SMBC is one of the largest Japanese banks by assets, with over ¥238,700 billion ($1.6 trillion) in total assets spanning 39 countries and territories.