Up in the air

Air India, which is in desperate need of funds to stay afloat, proposed to banks that they should hypothecate its aircraft. Though privately-owned Indian airlines have signed such agreements with foreign banks, Indian banks are yet to enter the uncharted territory of lending against aircraft as security. Since the banks could not turn down Air India's proposal outright, they offered an innovative scheme in return. Instead of direct hypothecation, they asked Air India to sign agreements with its competitors, so that the banks could sell the aircraft to them if the state-owned airline defaults. No surprise, the proposal did not see the light of day!