Standard Chartered and Bank of India have announced a successful joint financing of a $215 million term loan that was granted to AI Fleet Services IFSC Limited, a leasing subsidiary of Air India. AIFS is located strategically in Gujarat International Finance Tec-City (GIFT City). This is a major financing facility in the form of a seven-year amortising term loan facility, and this is specifically meant to fund the purchase of six Boeing 777-300 ER aircraft, which will be leased by AIFS to its parent company, Air India.

Expansion and financial ecosystem

The transaction marks a historic event in the Indian financial scene, being the first commercial aircraft finance transaction where a GIFT City borrower has been structured. The transaction highlights the common cause of both Standard Chartered and Bank of India to play an active role in supporting the growing aviation industry in India.

It underscores the accelerating nature of GIFT City as an expanding global aviation finance centre. This domestic deal is an important step to internalising aircraft financing in India, as Indian airlines have traditionally been offshore leasing and using financial centres like Dublin and Singapore.

Standard Chartered was a Structuring Bank in the process of carrying out this tricky financing. The whole transaction was also underwritten by Standard Chartered together with Bank of India as Mandated Lead Arrangers and Bookrunners (MLAB). This joint venture demonstrates the financial skill and strength in both the Indian and global banking industries, with headquarters in the GIFT IFSC.

The funding is part of the continued transformation of Air India, owned by the Tata Group, which is in an aggressive fleet renewal and expansion programme after it was privatised in January 2022. Air India has also started on a five-year transformation voyage and has ordered 570 aircraft in bulk.

The Chairman, AIFS & Chief Financial Officer of Air India, Sanjay Sharma, said, “Air India has embarked on a five-year transformation journey, placing an order for 570 aircraft, and GIFT City will be important for financing of these aircraft. With this commercial aircraft finance transaction via Standard Chartered and Bank of India we are glad to see GIFT City maturing further and emerging as an aircraft leasing and financing option for airlines as Indian aviation takes strides.”

The CGM – International Financial Services Centres Authority, GIFT City (IFSCA), Ashutosh Sharma, said, “GIFT IFSC is developing strongly as a globally competitive ecosystem for financial services, including aircraft leasing and financing. The successful closure of this aircraft financing deal, originated within GIFT IFSC and executed among Bank of India (IBU GIFT City branch), Standard Chartered Bank, and AI Fleet Services IFSC Limited for wide-body commercial aircraft, marks a significant milestone. This transaction not only paves the way for future commercial aircraft financing through the GIFT City framework but also underscores GIFT IFSC’s emerging role as a growing hub for aviation financing and a destination offering competitive foreign currency loan structures.”

Quotations Source: IndianWeb2  

Conclusion

The successful completion of the $215 million term loan by Standard Chartered and Bank of India to the lease subsidiary of Air India, AIFS, is a significant inflexion point in the Indian aviation finance ecosystem. This transaction, which finances the giant fleet expansion of Air India by arranging the financing of the first-ever commercial aircraft in the country through a GIFT City borrower. It will help finance the massive fleet expansion of Air India and establish GIFT City as a strong and competitive international financial centre in the aviation leasing and financing sector, which will facilitate future domestic transactions in the sector.