3 Domestic carriers to require $10-12 bn for aircraft acquisition

Despite this, Indian carriers are expected to place fresh aircraft orders at the forthcoming Farnborough Airshow in the UK starting later this month, it said.

The three airlines "will need a further USD 10-12 billion over the next 2-3 years to finance scheduled aircraft deliveries," the Centre for Asia Pacific Aviation (CAPA) said in its Indian Aviation-2010 Mid-Year Outlook report.

CAPA expects that Indian carriers will soon be making headlines again for new aircraft orders, it said adding that while IndiGo was looking to acquire up to 150 aircraft, SpiceJet would go for 47.

Air India was planning to take on lease 10 Airbus A-330s as well as several A-320s and turboprop ATR planes, it said.Some of these orders may even be announced at the Farnborough Airshow starting July 19, the report said.

Despite improved environment for the operations of Air India, Jet Airways-JetLite and Kingfisher, a complete recovery from the turbulence of the last couple of years would "still take time, largely due to the stress experienced on their balance sheets," it said.
Stating that nearly half of the USD 13.5-billion debt on these airlines was aircraft-related, CAPA forecast that these carriers would take a little more time to overcome the impact caused by the recent downturn in the global economies.

According to the report, the total debt of these three carriers was approximately USD 13.5 billion, with an annual interest burden well in excess of USD one billion.This consists of approximately USD 7.5 billion in aircraft-related debt, and USD six billion of working capital and other loans, the report said.

Outstanding amounts payable to vendors such as oil companies and airports were in addition to this, it said, adding that debt financing on this scale for aircraft financing was not unusual.

The concern, however, relates to the low equity base, which makes raising additional capital a challenge, at a time when the three carriers would need a further USD 10-12 billion over the next 2-3 years to finance scheduled aircraft deliveries, the report said

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