Delhi axes Air India sale and leaseback deals for 21 Boeing 787s

India’s government has terminated wasteful sale and lease-back agreements at Air India (AI, Mumbai Int’l) regarding twenty-one B787-8s, opting instead to make all of the outstanding payments as well as penalties for breaking the contracts, two anonymous sources “in the know” told The Economic Times newspaper on January 28.

The newly Tata Sons-owned flag carrier will now own the aircraft in question instead of being further weighed down by the legacy of having sold the aircraft to a lessor at a premium and continuing to lease them back.

“The lease agreements were very costly. Also, the pandemic has made aircraft cheaper making the underlying leasing rates more feasible,” one of the insiders said.

According to the ch-aviation fleets advanced module, Air India operates a fleet of twenty-seven of the widebodies, six of which were already owned by the airline. Nine of the remaining twenty-one B787-8s – three each – had been leased from FLY Leasing, Meridian Aviation Partners, and Nomura Babcock & Brown. The lease end dates for all of the twenty-one leased B787-8s ranged from 2023 to 2027.

Of its total fleet of 124 aircraft, at least 54 are leased including the twenty-one B787s.

Air India took delivery of its first B787-8, VT-ANH (MSN 36276), in September 2012 after protracted arguments between the government of India and Boeing over compensation payments for delivery delays. In 2014, the airline secured sale and leaseback deals with institutions including one with the State Bank of India and the Bank of India and other separate agreements with Deutsche Bank and Investec Bank.

One of the sources told The Economic Times that Tata Sons plans to tighten up Air India’s revenue management, focusing on ancillary revenue and cargo while renegotiating engineering, fuel, and travel agent contracts. Almost all existing debts to suppliers have been paid, they added. No decisions have yet been made on the carrier’s fleet, however.